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Does Take-Two Interactive Software, Inc. (TTWO) Deserve To Dip Under Threat Of Competition?

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In the ever-evolving process of understanding what a stock is truly worth, we are going to look at Take-Two Interactive Software, Inc. (TTWO) today from the standpoint of its EV/Rev ratio to see just what the company’s current market valuation implies about its worth as a take-out candidate. The EV/Rev ratio is also known as the Enterprise Value-to-Revenue ratio. It’s an alternative to price-to-sales that offers advantages by accounting for cash and debt.

In fact, one might suggest that the best way to achieve this is through taking a look at the company’s price-to-sales ratio (in this case, we are talking about 5.97). However, the problem with this measure, as noted above, is that it doesn’t consider the balance sheet as a tangible item.

For example, if you were to walk into company headquarters tomorrow and negotiate a deal to outright purchase Take-Two Interactive Software, Inc, you would know you were going to own the company’s cash, and also take on its liabilities as your own. So, the balance sheet is part of the value of the company, and there’s no getting around it.

That’s why we might consider the company’s enterprise-value-to-revenue ratio as a superior means of valuing its current operational flows than price-to-sales. And in today’s innovation-driven market, operational flows seem to rule the day.

In this case, Take-Two Interactive Software, Inc is currently in possession of an enterprise value of 10.31B. That number is derived from the company’s market cap (which is currently at 11.26B) minus its cash and equivalents (which currently sit at roughly 1.28B) plus its outstanding debt (now at 212.86M). Occasionally, you will see this number include minority interest and preferreds. However, let’s keep it simple today.

That gives us one half of the equation. The other half is the trailing-year revenues. For Take-Two Interactive Software, Inc, we are talking about 1.89B. We use the trailing revenues to avoid having to consider potential inflections in the environment or flaws in company or analyst outlooks. 

When we put them together, we get an EV/Rev ratio of 5.47.

It has been suggested that this method of valuing stocks struggles with unproven names such as penny stocks because they often have a checkered history in terms of operational success, and therefore, can end up with negative enterprise value. In other words, they have such small market caps that the balance sheet becomes the principal factor in the equation. And balance sheets can be highly variable from stock to stock in ways that may be misleading when trying to chase down the concept of “intrinsic value”.

Otherwise, investors may prefer other means of attempting to nail down the value of Take-Two Interactive Software, Inc, including standard forward P/E (which comes in at 24.35), trailing P/E (which comes in at 62.80), price-to-sales, as we noted above (coming in at 5.97, price-to-book (which currently sits at 10.11), and enterprise value-to-EBITDA (41.72) — which represents the ratio of the EV to the company’s earnings before interest, taxes, depreciation, and amortization.

In any case, however you choose to nail down the valuation of a company, you are probably first going to need to admit that there is no one perfect answer.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Alibaba Group Holding Ltd. ADR (NYSE:BABA) rally could be short lived

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It’s time to take an in-depth technical look at Alibaba Group Holding Ltd. ADR (NYSE: BABA) . Our goal here today is to examine how the stock is behaving so we can use that examination as a lens through which to evaluate the stock as a possible investment opportunity.

Technical analysis is predicated on the idea that all important information is already interpolated by buyers and sellers of a security, so the only thing left to really interpret and predict the action is that behavior itself. For market timers, one of the most important tools we have at hand is the key indicators that show whether the stock is stretched in one direction or the other too much, too far, or too fast. In other words, is the stock overbought, oversold, or somewhere in the middle?

For that, we first turn to the RSI measure. The 14-day RSI is the standard flag-bearer for this type of analysis. Right now, for Alibaba Group Holding Ltd. ADR, the measure stands at 53.22%. That shows where the stock is as far as the degree to which it is becoming overbought or oversold relative to its price history.

If we look at other overbought/oversold oscillators, we can get even more perspective. The stochastic measure is a good example. Right now, the stock over the past month of action shows a score of 51.91% on the 20-day fast stochastic.

In an even broader sense, NYSE: BABA has recently been showing trading action that suggests an overall bullish posture on the chart according to trend-related measures such as a major moving average. In this case, we are looking at the relative positions of the 50-day and 200-day simple moving averages. The implication, of course, is that money is generally treating this stock in a positive manner in terms of capital flows.

Next, we want to look at participation levels. Our conviction on a stock in terms of its technicals is almost entirely subject in the end to the type of volume of trade we see going on in the stock. Patterns of action gain meaning strictly through volume levels. In other words, you need plenty of people playing the game for the score to matter. At this point, relative volume measures have been strong, indicating interest among traders, investors, and money managers for the stock over the past month. As it stands at present, the stock might find important action around key levels on the chart, which is something else we like to take a close look at.

One of the best ways to define key levels is through derivations built off of the Fibonacci series. This is widely used by professional firms in the market. The Fibonacci series is a set of numbers derived from adding the prior number to the next one: 0,1,1,2,3,5,8,13,21,34, etc. You will note that each number is the sum of the prior two numbers. The series has been found to exemplify the mathematics underlying many growth systems. The ratio of one number to the next in the series approaches 61.8% (or 38.2%, depending on which direction you move) as a limit. In markets, the key levels are often played at retracements defined by this ratio and its associated connections. In this case, the critical 38.2% level drawn off the 52-week high of $206.20 sits at $166.13. NYSE: BABA also has additional resistance above at the stocks 200-day simple moving average, which sits at $ 166.12.

So far, we have looked at oscillators, moving average trends, and participation levels. However, sometimes, there is information carried in simply the degree of movement in a stock. For example, over the past trading month, NYSE: BABA has made a move of -6.78. By comparison, over the trailing 100 days, the stock is outperforming the S&P 500 by 2.86, and its gotten there by action that has been more volatile on a day-to-day basis than most other stocks on the exchange.

Obviously, that tells us a ton about this name. To even drill down deeper into the movement, we can see that the stocks recent action has come on a historical volatility score of 41.48%. That number is derived from the standard deviation of returns of some hypothetical trader buying the stock at a given average price during the specified period. If we want to look at range of action in a simplistic sense, the best way is to use the average true range over the most common reference time period, so we are staying on the same page with the market. In this case, the 20-day ATR as a percentage of its 20-day moving average comes in at 3.23%.

We plan to update our take on this stock as its pattern of behavior progresses from here.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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eBay Inc. (NASDAQ:EBAY) is up for the next big collaboration ?

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Well-rounded due diligence on a stock should take into account a basic analysis of core company trends such as top-line and bottom-line performance, margins, analyst views, cash flows, and overall balance sheet health. But that’s not all. One must also take a dispassionate, professional survey of a stocks technical characteristics.

For that, we must turn to the chart. Today?s object of technical analysis is eBay Inc. (EBAY).

We will start our analysis by examining overall direction of trend. In the most basic sense, we can see that EBAY has been working in a bullish posture on a larger timeframe, as indicated by the relative positioning of the 50-day and 200-day simple moving averages. In other words, if the 50-day moving average is trading above the 200-day, it is traditionally seen as a bullish chart trend. Conversely, if the 50-day moving average is trading below the 200-day, it is traditionally labeled a bearish trend or bearing. As noted, for EBAY, that adds up to a bullish designation the main point being that we have money flows leaning in a generally positive direction for the stock.

Next, we will turn to our analysis of the primary oscillating indicators to assess the degree to which the stock is stretched in its movement at present. The key tools for this analysis are the 14-day Relative Strength Indicator (RSI) and the 20-day fast stochastic. In each case, the point is to measure overbought or oversold behavior ie, whether the stock has gone too far too fast in one direction or the other. If we see a score above 75 (overbought) or below 25 (oversold), history suggests one is wise to expect some reversion to the mean. For EBAY, we can see that our 14-day RSI shows a score of 57.63%, while the 20-day fast stochastic reports a score of 47.61%.

Next, we will turn to key levels of interest on the chart, with an emphasis on Fibonacci retrace points, range extremes, and major moving averages. In this case, the critical 38.2% level drawn off the 52-week high of $46.99 sits at $41.22. EBAY also has additional resistance above at the stocks 200-day simple moving average, which sits at $ 37.06.

We also want to look at relative performance and overall volatility scoring to understand value and risk in play. EBAY has moved $+3.01 over the past month or so. Over the trailing 100 days, the stock is outperforming the S&P 500 by 5.51%. This movement has come on a more volatile bearing from one day to the next relative to the broader market, according to the stocks 36-month beta.

Similarly, we can see that the stocks recent action has come on a historical volatility score of 53.70%. To get that score, one has to take the standard deviation of returns for a random trading input assuming buying the stock at a given average price during the specified period. On a more basic level, one might look at the 20-day ATR as a percentage of its 20-day moving average. That measure gives us a volatility score of 2.6%.

Finally, we?ve spent some time looking at price as a factor in many forms and from many angles. But what about volume? Notably, many chartists see volume as more indicative for conviction in bearing or pattern than price measures, averages, or oscillators. Volume records the true degree of participation involved in a stock. If price pattern is like a word written on a word processor, volume is like the font size and punctuation. In this case, we want to examine relative volume measures to get a feel for interest in the stock of late. Right now, this stock has been showing strong relative volume, which indicates interest among those making a market for shares of the stock, and that should be seen as a key factor in drawing conclusions about your level of interest as well.

That wraps up todays analysis, but we will be sure to check back on this stock again soon.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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JD.com Inc. ADR (NASDAQ:JD) buy out on the horizon ?

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Well-rounded due diligence on a stock should take into account a basic analysis of core company trends such as top-line and bottom-line performance, margins, analyst views, cash flows, and overall balance sheet health. But that’s not all. One must also take a dispassionate, professional survey of a stocks technical characteristics.

For that, we must turn to the chart. Today?s object of technical analysis is JD.com Inc. ADR (JD).

We will start our analysis by examining overall direction of trend. In the most basic sense, we can see that JD has been working in a bullish posture on a larger timeframe, as indicated by the relative positioning of the 50-day and 200-day simple moving averages. In other words, if the 50-day moving average is trading above the 200-day, it is traditionally seen as a bullish chart trend. Conversely, if the 50-day moving average is trading below the 200-day, it is traditionally labeled a bearish trend or bearing. As noted, for JD, that adds up to a bullish designation the main point being that we have money flows leaning in a generally positive direction for the stock.

Next, we will turn to our analysis of the primary oscillating indicators to assess the degree to which the stock is stretched in its movement at present. The key tools for this analysis are the 14-day Relative Strength Indicator (RSI) and the 20-day fast stochastic. In each case, the point is to measure overbought or oversold behavior ie, whether the stock has gone too far too fast in one direction or the other. If we see a score above 75 (overbought) or below 25 (oversold), history suggests one is wise to expect some reversion to the mean. For JD, we can see that our 14-day RSI shows a score of 59.47%, while the 20-day fast stochastic reports a score of 65.33%.

Next, we will turn to key levels of interest on the chart, with an emphasis on Fibonacci retrace points, range extremes, and major moving averages. In this case, the critical 38.2% level drawn off the 52-week high of $50.68 sits at $42.73. JD also has additional resistance above at the stocks 200-day simple moving average, which sits at $ 41.83.

We also want to look at relative performance and overall volatility scoring to understand value and risk in play. JD has moved $+1.07 over the past month or so. Over the trailing 100 days, the stock is outperforming the S&P 500 by 15.69%. This movement has come on a more volatile bearing from one day to the next relative to the broader market, according to the stocks 36-month beta.

Similarly, we can see that the stocks recent action has come on a historical volatility score of 42.93%. To get that score, one has to take the standard deviation of returns for a random trading input assuming buying the stock at a given average price during the specified period. On a more basic level, one might look at the 20-day ATR as a percentage of its 20-day moving average. That measure gives us a volatility score of 3.57%.

Finally, we?ve spent some time looking at price as a factor in many forms and from many angles. But what about volume? Notably, many chartists see volume as more indicative for conviction in bearing or pattern than price measures, averages, or oscillators. Volume records the true degree of participation involved in a stock. If price pattern is like a word written on a word processor, volume is like the font size and punctuation. In this case, we want to examine relative volume measures to get a feel for interest in the stock of late. Right now, this stock has been showing weak relative volume, which indicates lack of interest among those making a market for shares of the stock, and that should be seen as a key factor in drawing conclusions about your level of interest as well.

That wraps up todays analysis, but we will be sure to check back on this stock again soon.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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