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If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. But Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has fallen short of that second goal, with a share price rise of 80% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 46% in the last year.
Since the stock has added US$1.2b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Because Take-Two Interactive Software made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally hope to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last 5 years Take-Two Interactive Software saw its revenue grow at 14% per year. That's a pretty good long term growth rate. The annual gain of 12% over five years is better than nothing, but falls short of the market. You could even argue that the share price was over optimistic, previously.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Take-Two Interactive Software
A Different Perspective
It's nice to see that Take-Two Interactive Software shareholders have received a total shareholder return of 46% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on Take-Two Interactive Software it might be wise to click here to see if insiders have been buying or selling shares.
But note: Take-Two Interactive Software may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.