Investors who bought Take-Two Interactive (NASDAQ:TTWO) five years ago would have seen more than 300% growth during that time. The company has succeeded in putting out a few key franchises, such as the Grand Theft Auto games, that have spurred massive revenue growth during that time and helped Take-Two become a larger name in the gaming industry. 

However, investors might be questioning if Take-Two will be able to continue growing in the long term, especially now that it has an industry-high valuation and faces tough competition for gamers worldwide. Here's the case for why Take-Two still looks like a great long-term buy. 

Video games mean big money

The video game industry has seen surprising growth in recent years, reaching a record $91 billion in 2016, according to SuperData Research. Growth in content and in technology to get that content to gamers, such as high-powered new consoles, has helped the overall market to expand. Additionally, the ability for games and in-game content to be accessed through digital downloads (instead of through physical plastic games or discs) has made the business even more profitable for the content creators. 

Man and woman laugh while playing video games.

Image source: Getty Images.

The combination of overall market growth and profitability growth has helped push shares of the big gaming companies, such as Take-Two, Electronic Arts (NASDAQ:EA) and Activision Blizzard (NASDAQ:ATVI) higher. There are a few growth drivers that could push the industry -- and particularly Take-Two -- higher still. 

E-sports take off

Many analysts have questioned in the past how big an audience e-sports (i.e., competitive gaming) could actually get. Take-Two's CEO, Strauss Zelnick, made the point in a recent interview with Bloomberg that just as in physical sports, fans want to participate at high levels of the sport even if they can't themselves play at that level. That seems to be true, as more than 200 million people worldwide now tune into e-sports, according to SuperData, and the number is expected to grow substantially in the next few years. 

E-sports often involve shooter or fantasy games, or sometimes physical sports as well. Take-Two recently announced a partnership with the NBA to run an interactive e-sports league through Take-Two's NBA 2K game (already one of the top games in its category). Participants will follow the NBA's season and have the ability to interact with teams and players. This e-sports league kicks off in the NBA's 2018 season. 

The app icon for Take Two's NBA 2K game for mobile.

Image source: Apple App Store / Take-Two Interactive.

Investments in mobile gaming

Mobile gaming has been another growth driver for the game industry, and an area in which each big name has been trying to do well. Mobile gaming generated as much as $41 billion in 2016, according to SuperData, nearly half of the total industry. Activision Blizzard bought Candy Crush maker King Digital Entertainment a little over a year ago, and EA has been growing its mobile portfolio as well. 

Take-Two has already advanced in mobile gaming, with leading games such as NBA 2K for mobile, which as of this writing is in the top 10 paid apps on the App Store. The company announced in February that it would spend $250 million in cash and stock to acquire the mobile gaming company Social Point. This Spanish maker of free-to-play mobile games has grown sales nearly 30% each of the last three years, according to Take-Two management, and its two most successful games, Dragon City and Monster Legends, have been downloaded more than 180 million times. 

Is Take-Two too expensive?

While its opportunities in e-sports and growth in mobile gaming look to be great long-term drivers, Take-Two is already growing revenue at an impressive pace thanks to its solid current franchises like the Grand Theft Auto series, Borderlands, and Red Dead Redemption -- games that have helped the company more than double its sales over the last five years. Yet, even with rising sales, the company has reported losses as it makes investments in its future growth. 

For the fiscal year ended March 31, 2016, the company reported a loss of $0.10 per share. However, for fiscal 2017, ended March 31, 2017, Take-Two has guided for earnings between $1.15 and $1.25 per share. Currently, the stock looks expensive: Its price is 350 times trailing-12-month earnings. Activision's P/E is 38 and EA's is 22 -- but by next year's expected earnings estimates, all three companies come in line at around 21 times forward earnings estimates. By price to sales, Take-Two looks even more attractive at around 3.8 now, compared with around 5.6 and 5.9 for Activision and EA, respectively. Take-Two expects to report sales growth of as much as 27% for fiscal 2017 year over year, so that ratio will likely look even better in the months ahead.  

This is not to say that Activision and EA themselves don't look like attractive long-term holdings -- quite the opposite, as the growing gaming industry and these companies' domination of it are likely to continue rewarding shareholders for years to come. Still, Take-Two -- a younger company that has its own risks and expected volatility as it's priced for high performance  -- has proven its growth potential and looks to be one of the best opportunities for outperformance in this industry in the years ahead. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.