Last update on 2024-06-06

Take-Two Interactive Software (TTWO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 2/9)

Take-Two Interactive Software Piotroski F-Score Analysis for 2023 shows a score of 2/9, indicating weak financial health based on profitability, liquidity, and leverage.

Short Analysis - Piotroski Score: 2

We're running Take-Two Interactive Software (TTWO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Take-Two Interactive Software (TTWO) was analyzed using the Piotroski F-Score, a financial assessment that ranges from 0 to 9 based on profitability, liquidity, and operating efficiency metrics. TTWO scored 2 points, indicating weak financial health. In terms of profitability, the company has negative net income and declining ROA but managed to maintain positive cash flow from operations. Concerning liquidity, the leverage ratio has increased, and the current ratio has decreased drastically. Lastly, in operating efficiency, the company has a falling gross margin and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski analysis, Take-Two Interactive Software (TTWO) exhibits several financial weaknesses, scoring only 2 out of 9 points. These findings suggest the company faces significant profitability, liquidity, and efficiency challenges. As an investor, it may be wise to approach this stock with caution. Further investigation is recommended to understand the underlying issues before considering an investment in TTWO.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Take-Two Interactive Software (TTWO)

Company has a positive net income?

Net income is the total revenue minus expenses, taxes, and costs. Positive net income indicates overall profitability, crucial for sustainability.

For the fiscal year 2023, Take-Two Interactive Software (TTWO) recorded a net income of -$1,124,700,000, marking it as negative. This indicates the company faced a substantial loss. Historically, TTWO's net income values over the last two decades have shown volatility, including multiple periods of both negative and positive earnings. Despite periods of profitability, the recent figure starkly emphasizes financial challenges. Therefore, based on Piotroski's criterion, this aspect scores 0 points.

Company has a positive cash flow?

Examining Cash Flow from Operations (CFO) is essential to determine if a company generates enough cash to sustain and expand its operations.

For the fiscal year 2023, Take-Two Interactive Software reported a Cash Flow from Operations (CFO) of $1,100,000, which is positive. Hence, in the Piotroski F-Score analysis, 1 point is awarded for positive CFO. Historical data points out fluctuating operational cash flows, with years like 2009 and 2010 displaying significant negatives of -$64,045,000 and -$210,204,000, respectively, while 2013 demonstrated a remarkable $700,262,000. Despite this volatility, the company managed to report a positive CFO for 2023, marking a resilient trend. The diminishing figures in recent years (from a steep $258,000,000 in 2022 to $1,100,000 in 2023) call for further scrutiny into any underlying issues affecting operational efficiency.

Return on Assets (ROA) are growing?

The return on assets (ROA) measures how efficiently a company's assets generate profit. It's an important indicator of operational efficiency.

In 2023, Take-Two Interactive Software (TTWO) registered an ROA of -0.1004, a significant drop from an ROA of 0.0665 in 2022. This reduction signifies a decline in the company's efficiency at using its assets to generate profit. When compared to the 20-year trend, where ROA figures vary considerably, this downward movement is alarming. Furthermore, when paralleled with the industry median ROA, which has been generally above 0.47 over the same period, TTWO's performance in 2023 is notably behind. Thus, for this Piotroski criterion, Take-Two Interactive Software will receive a score of 0.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a criterion used to judge the quality of earnings. A positive difference means that a company is generating sufficient cash flow from operations, which can be a sign of strong fundamentals.

In 2023, Take-Two Interactive Software reported an Operating Cash Flow of $1.1 million compared to a Net Income of -$1,124.7 million. This indicates that the Operating Cash Flow is significantly higher than the Net Income for the year. This trend is positive because it shows that the company is able to generate cash from its core operations despite reporting a net loss. The fact that cash flow from operations is not only positive but also higher than the net income indicates resilience and effective cash management. Historically, the company's Operating Cash Flow has fluctuated significantly over the years, but maintaining positive cash flow in challenging times is encouraging.

Liquidity of Take-Two Interactive Software (TTWO)

Leverage is declining?

Change in Leverage indicates a company's ability to manage its debt levels over time, which is crucial for assessing financial health.

The leverage ratio for Take-Two Interactive Software increased from 0.0323 in 2022 to 0.1311 in 2023. This means that the company has taken on more debt relative to its assets. Historically, the leverage ratio has fluctuated significantly, reaching as high as 0.2752 in 2012 and as low as 0 in 2005 and 2006. The increase in leverage is not favorable and warrants a score of 0 in this criterion, reflecting a potential rise in financial risk.

Current Ratio is growing?

Explain the criterion for Take-Two Interactive Software (TTWO) and why it is important to consider

The Current Ratio is an important financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets. For Take-Two Interactive Software (TTWO), the Current Ratio decreased significantly from 1.839 in 2022 to 0.6512 in 2023. This decline signifies a deterioration in liquidity, indicating that the company may face challenges meeting its short-term obligations. Historically, TTWO's Current Ratio has fluctuated but it has never been this low in the last 20 years. Compared to the industry median, which stands at 1.2382 for 2023, TTWO is performing below average. A stable or increasing Current Ratio is usually favorable, and in this case, the 0.1878 coefficient variance from the industry median further emphasizes the company's current liquidity risk. Hence, TTWO gets 0 points for this criteria.

Number of shares not diluted?

The change in shares outstanding criterion helps investors assess whether a company is issuing more shares or buying back shares, both of which have significant implications for shareholder value.

The outstanding shares for Take-Two Interactive Software have increased from 115,500,000 in 2022 to 159,900,000 in 2023, indicating an increase in outstanding shares. This is usually seen as neutral to negative for existing stockholders, as it can potentially dilute their ownership percentage and cause earnings per share (EPS) to decline. Over the past 20 years, Take-Two Interactive Software has generally seen increases in outstanding shares from 59.35 million in 2003 to the current 159.9 million, with significant jumps noticeable in years like 2013 (when shares almost doubled). Hence, no point is added for this criterion as it fails to meet the conditions outlined by the Piotroski analysis.

Operating of Take-Two Interactive Software (TTWO)

Cross Margin is growing?

Change in Gross Margin evaluates whether a company's profit relative to its revenue is improving. Higher gross margins are a sign of increased profitability.

In 2023, Take-Two Interactive Software (TTWO) reported a Gross Margin of 0.4272, a significant decrease from the 0.5619 Gross Margin in 2022. This notable drop suggests a worsening in profitability on a year-over-year basis. Reflection on the last 20 years reveals a historical average that fluctuates around 0.400 to 0.500, with peaks reaching up to 0.5619 in 2022, highlighting that the 2023 figure is below many past performances as well as the industry median Gross Margin of 0.6972. This downward trend earns 0 points in the Piotroski analysis, indicating concerns regarding the company’s ability to manage production or operational costs effectively.

Asset Turnover Ratio is growing?

Asset Turnover measures how efficiently a company uses its assets to generate sales revenue. A rising asset turnover indicates improving efficiency.

With the Asset Turnover rate decreasing from 0.5574 in 2022 to 0.4775 in 2023, Take-Two Interactive Software shows a decline in asset use efficiency. This disappointing trend accrues a score of 0 for the asset turnover criterion. Furthermore, it's notable that this marks a continued decline, seeing that the company's turnover has been decreasing on a linear trajectory over the past five years starting at 1.5276 in 2014.