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CHDN Stock Study (10-22-25)

Posted by on January 7, 2025 at 07:07 | Last modified: October 22, 2025 09:38

I recently did a stock study on Churchill Downs Inc. (CHDN) with a closing price of $96.61. The previous study is here.

M* writes:

     > Churchill Downs Inc is a gaming entertainment, online wagering,
     > and racing company. It operates through three business segments:
     > Live and Historical Racing, Wagering Services, and Gaming. The
     > Live and Historical Racing segment includes live and historical
     > pari-mutuel racing. The Wagering Services segment includes the
     > revenue and expenses from pari-mutuel wagers through TwinSpires,
     > companies retail and online sports betting business and Gaming
     > segment includes revenue and expenses for the casino properties
     > and associated racetracks that support the casino license. The
     > Gaming segment generates revenue and expenses from slot
     > machines, video lottery terminals, video poker, HRMs,
     > ancillary food and beverage services, hotel services,
     > commission on pari-mutuel wagering, and racing events.

Over the past decade, the medium-size company has grown sales and earnings at annualized rates of 10.5% and 25.7%. Lines are mostly up, straight, and parallel except for sales dips in ’17 and ’20 along with EPS declines in ’19, ’20 (large), and ’23. 5- (10-) year EPS R^2 is 0.62 (0.37) and Value Line (VL) gives an Earnings Predictability score of 30.

Over the past decade, PTPM leads peer and industry averages while trending up from 9.2% (’15) to 21.0% (’24) with a last-5-year mean of 19.9%. ROE also leads peer and industry averages while trending up from 8.0% (’15) to 38.1% (’24) with a last-5-year mean of 45.7%. Unfortunately, Debt-to-Capital is higher than peer and industry averages over the last few years as it has increased from 55.9% (’15) to 81.9% (’24) with a last-5-year mean of 84.7%.

Quick Ratio is 0.39 and Interest Coverage is only 2.9 per M* (3.2 per VL) who also assigns a “Narrow” Economic Moat. VL gives a B+ grade for Financial Strength.

With regard to sales growth:

My 3.0% forecast is toward lower end of the range.

With regard to EPS growth:

My 5.0% forecast is below the long-term-estimate range (mean of five: 8.2%). Initial value is ’24 EPS of $5.68/share instead of 2025 Q2 EPS of $5.82 (annualized).

My Forecast High P/E is 21.0. Over the past 10 years, high P/E ranges from 21.8 in ’22 to 41.3 in ’15 and ’21 (upside outlier of 644 in ’20 excluded). The last-5-year mean is 29.2 and the last-5-year-mean average P/E (also excluding ’20) is 24.8. I am below the range.

My Forecast Low P/E is 13.0. Over the past 10 years, low P/E ranges from 15.1 in ’22 to 27.6 in ’21 (upside outlier of 160 in ’20 excluded) with a last-5-year mean of 20.3. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $73.80 is default based on initial value given above. This is 23.6% less than the previous close and 13.8% less than the 52-week low.

Over the past decade, Payoff Ratio (PR) falls from 31.1% in ’15 to 7.2% in ’24 with a last-5-year mean of 7.7% (excluding upside outlier of 189% in ’20). I am forecasting below the range at 6.0%.

These inputs land CHDN in the HOLD zone with a U/D ratio of 2.4. Total Annualized Return (TAR) is 9.8%.

PAR (using Forecast Average—not High—P/E) of 5.3% is less than I seek in a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only five studies done in the past 90 days (my study and four outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 6.5%, 8.2%, 27.4, 15.5, and 30.1%. [Although a sample size of five studies is too small for a valid comparison] I am lower across the board. VL projects a future average annual P/E of 25.0, which is higher than MS (20.0) and much higher than me (17.0).

MS high / low EPS are $8.72 / $5.80 versus my $7.25 / $5.68 (per share). My high EPS is less due to a lower growth rate. VL is highest at $9.35.

MS LSPF of $76.10 implies a Forecast Low P/E of 13.1: less than the above-stated 15.5. MS LSPF is 15.4% less than the default $5.80/share * 15.5 = $89.90, which results in more conservative zoning. MS LSPF is 3.1% greater than mine, however.

I believe MOS is robust in this study because my inputs are near or below respective analyst/historical ranges [and MS averages]. In [anecdotal support is MS TAR (20.5%): 10.7% per year greater than mine.

With regard to valuation, PEG is 1.8 and 3.2 per Zacks and my projected P/E, respectively: somewhat overvalued (1.6 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.67.

Qualitatively speaking, my only concern with this company includes low liquidity ratios and high Debt-to-Capital.

Per U/D, CHDN is a BUY under $93/share. BI TAR criterion is met 152.2 / ((14.57 / 100 ) +1 ) ^ 5 ~ $77 given forecast high price ~$152.

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P.S. The Kentucky Derby is coming to Prime Time in ’26. You heard it here first!

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