Churchill Downs Inc (CHDN): what the price assumes

In the published model solve dated 2026-Q2, anchored at $89.90, Churchill Downs Inc (CHDN) is priced for -3.8% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-31 · Source: https://boothcheck.com/report/CHDN

Headline

FieldValue
TickerCHDN
CompanyChurchill Downs Inc
Sector / IndustryCommunication Services
Current price$89.90/sh
CompositionLive and simulcast racing 17% / Historical racing 35% / Racing event-related services 6% / Gaming 31% / Other 11%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin (value-band context)7.4%
Operating margin today24.1%
Margin compression (value-band)-16.7pp
Implied growth-3.8%
Multiple paid15x operating income

The operating-margin figure is value-band context at year 8: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 7.4% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history-0.78σ
cohort percentile (of 34 peers)41

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.40x5expensive
Earnings6.54x5expensive
Relative—0—
Growth1.01x2expensive

Families that justify the price: Growth Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.7%); the inversion above states its own rate.

Per-Model Detail (n=12)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
DCF Exit MultipleGrowth$120.540.75xyesExit EV/EBITDA: 9.4x / 11.4x / 13.4x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative——noP/E 14x (static sector reference · 2026-04), scenarios: 11.7x / 14.0x / 16.3x (bear / base = reference held flat / bull), EV/EBITDA 9x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$64.121.40xyesBV/sh $19.24, ROE (TTM) 30.8%, ke 9.3%
Two-Stage Excess ReturnAsset$121.430.74xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$70.401.28xyesRev $3.0B, growth 6% (input: historical growth; tapered), Terminal P/S: 1.7x / 2.1x / 2.4x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$45.531.97xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.60B × (1−26%) / WACC 5.7% → EPV (no growth)
Residual IncomeAsset$98.170.92xyesBV $19.24 + 5yr PV of (ROE (TTM) 30.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$50.561.78xyes√(22.5 × EPS $5.91 × BVPS $19.24) — Graham's conservative floor
EV/EBITDA RelativeRelative——noEBITDA $0.95B × sector EV/EBITDA 9.0x
FCF YieldEarnings$13.756.54xyesFCF $512.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$8.7510.27xyesSBC-adj FCF $0.48B (FCF $0.51B − SBC $0.03B) capitalized at Kₑ
Ben Graham FormulaEarnings$4.9518.16xyesEPS $5.91 × (8.5 + 2×-5.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$14.976.01xyesBV $19.24 × (ROIC 4.5% / WACC 5.7%)
P/Sales SectorRelative——noRevenue $2.99B × sector P/S 2.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$63.851.41xyesEPS $5.91 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Live and Historical Racingoperatingenterprise$1.4b—$8.9b indicative EV subtotalindicative enterprise value
Wagering Services and Solutionsoperatingenterprise$526.3m—$2.5b indicative EV subtotalindicative enterprise value
Gamingoperatingenterprise$1.0b—withheldunresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

FieldValue
Net debt$5.0b
Net debt / NOPAT (after-tax)9.31x
Net debt / operating income (pre-tax)6.87x
Interest coverage2.5x
Share count CAGR (buyback)-2.4%
Burning cashno

Bullet Takeaways

Bull Case

Gaming and racing companies are among the hardest things in the market to value, because the assets are licences as much as they are buildings. A casino floor is worth what the state permits it to be worth, and the permission is not for sale on any exchange. Churchill Downs sits at the awkward extreme of that problem. It owns one asset with no comparable anywhere, and it has spent a decade converting the goodwill from that asset into something a spreadsheet can actually handle.

The 151st Kentucky Derby ran on the first Saturday of May and, per the 10-K, generated an all-time handle record for the Kentucky Derby Race, Kentucky Derby Day Program, and Kentucky Derby Week races with nearly 147,000 fans. There is no second Kentucky Derby, no competitor building one, and no realistic path for a rival to manufacture 151 years of continuity. What makes that commercially interesting is not the one day of wagering. It is that the event underwrites a licence position in Kentucky that the company has been monetizing on the other 364 days.

That monetization is historical racing, and it is now the biggest revenue line in the company at roughly 35% of the mix. Derby City Gaming opened in Louisville in September 2018 as a purpose-built machine venue at the track, and the model has been replicated since. The first quarter of 2026 shows the compounding still running: revenue in the Live and Historical Racing segment rose $24 million, made up of a $17 million increase from Kentucky venues, $5 million from Virginia and $3 million from New Hampshire, against a $1 million decline at the racetrack itself. Each new venue is a discrete, financeable, permission-limited box that generates cash from day one. That is a much easier business to underwrite than a horse race.

The economics of the combination are better than the peer group's. Trailing operating margin runs at 24.1%, ahead of BYD at 17.4%, LVS at 22.7% and CZR at 16.2%, and behind only RRR at 29.0% among the casino operators in the comparison set. And the price paid for those economics sits in the lower half of the peer multiple range. The market is not currently charging a premium for the one-of-a-kind asset at the centre of it.

Capital allocation has been consistent through the buildout. The share count has fallen roughly 2.5% a year over the four years to March 2026, which for a company simultaneously funding new venues is a real choice rather than a leftover. Trailing operating income of $703.7M sits against trailing net income of $389.3M, the gap being interest and depreciation on the expansion. The concession the bull has to make is that the gap is large and the leverage behind it is heavy. The reply is that the debt bought venues that are now producing, and the first quarter says they are still producing more each year.

Bear Case

The competition for a gambling dollar no longer needs a building. DKNG filed revenue of $6.29 billion growing 25.8% and RSI $1.24 billion growing 28.2%, both from phones rather than floors, against Churchill Downs at $2.95 billion. The company's own 10-K does not pretend this is someone else's problem: it reports facing an increasingly high degree of competition from online or mobile platforms, including iGaming; sports betting; i-lotteries; prediction markets; and fantasy sports, and states plainly that such competition could divert customers from our properties. A historical racing venue is a destination. A prediction market is a tab already open on the customer's phone. The asymmetry in customer-acquisition cost between those two models is the structural fact underneath the next decade.

Layer the balance sheet on top of that. Net debt runs about 7.0 times operating profit, and trailing operating income covers the interest bill roughly 2.4 times. That is a capital structure built for a business whose cash flows are assumed to be stable and rising. The debt stack is real and dated: a senior secured term loan A of 1.1 billion dollars extended to 2029, a term loan B tranche requiring quarterly amortization, a revolver, and senior notes maturing in 2031. None of it is due tomorrow. All of it constrains what happens if venue revenue plateaus, because coverage near two and a half times leaves the company few options other than slowing the buildout that is currently generating the growth.

The valuation debate here is unusual, and worth stating precisely. Today's price works out to roughly 15.5 times company-wide operating income and inverts to operating profit declining about 3.7% a year, which sounds like a low bar until you notice why the static methods still land under the price. The earnings-power approach values normalized profit from a five-year average that includes materially weaker years, and the price sits at more than twice what that family reaches; against the peer-multiple family the premium is about 30%. In other words, the market is capitalizing the current level of profit, and the conservative methods are capitalizing the average level. The bear thesis is simply that the average is the better guide, because the recent level was produced by a venue-expansion programme that has to keep finding new states to enter.

That last point is the regulatory dependency. Historical racing machines exist because specific state legislatures and regulators decided that a slot-shaped device fed by archived race results counts as pari-mutuel wagering. The 10-K notes that the business is subject to laws and regulations across federal, state, local and international jurisdictions, that material financing transactions must be reported to and sometimes approved by gaming authorities, and that the company may not make a public offering of securities without the prior approval of certain gaming authorities. A growth engine whose legality is a state-by-state policy choice is a growth engine with a political beta, and no amount of operating skill hedges that.

The downside is not unbounded. Beyond the operating businesses the company carries roughly 114.1 million dollars of equity stakes in other entities, and the racetrack and its franchise are genuinely irreplaceable. But 114 million against a market value of $6.1B is a floor you would need a microscope to see, and the racetrack itself produced a $1 million revenue decline in the first quarter of 2026 while the machine venues grew. The trophy asset is not what is holding this valuation up.

Valuation

Two systems are looking at this price and reaching opposite conclusions, which makes it worth taking them one at a time. Run today's $86.48 backwards against current operating profit and the price works out to about 15.5 times company-wide operating income, embedding operating profit that shrinks roughly 3.7% a year over a five-year stage. That is a low bar. The multiple also sits in the lower half of the peer range, and the assumption is inside what the business has recently produced.

The static methods disagree, and the reason they disagree is the whole valuation question. The price sits about 30% above where the peer-multiple family lands, and well over twice the earnings-power family. But the earnings-power approach capitalizes a normalized figure built from a five-year average of operating income, and that average includes years before the historical racing venues reached their current scale. It is not saying the business is worth less than it earns. It is saying the business has not been earning at this level for very long. Trailing operating income of $703.7M against a trailing operating margin of 24.1% is a recent achievement, and the conservative frames have not yet accepted it as the base. Only the forward-looking approaches reach the price, on the assumption that the multiple the market pays for cash earnings now is the multiple it will still be paying in the exit year.

So the question a buyer is actually answering is whether the current profit level is a plateau or a peak. That is a judgment about the venue pipeline, not about the model. The first quarter of 2026 argues for plateau-and-rising: Live and Historical Racing revenue up $24 million, with $17 million of it from Kentucky, $5 million from Virginia and $3 million from New Hampshire. The racetrack itself contributed a $1 million decline.

The valuation is also more sensitive to the discount rate than most, because it resolves against a required return near 7.4%. A single percentage point added to that rate would move the operating-profit path this price assumes by roughly seven points, which for a business carrying this much debt means the market's view of its riskiness and its valuation are not independent variables.

The balance sheet is where the conversation ends, because it bounds everything else. Net debt sits at roughly 7.0 times operating profit, with interest covered about 2.4 times. That is not a distress signal, and the maturities are pushed out to 2029 and 2031, but it does mean the equity is a leveraged claim on a profit stream the conservative methods have not yet capitalized at today's level. Off to the side, about 114.1 million dollars of equity stakes in other entities sit outside that operating value, which is small relative to a $6.1B market value. The share count has come down roughly 2.5% a year over four years, so the leverage has at least been deployed alongside shrinking the equity rather than diluting it. Street targets sit well above the traded price, and both Wells Fargo and Jefferies trimmed theirs in recent weeks while keeping constructive ratings; those targets credit a continued venue-led profit ramp that the conservative methods here decline to project.

Catalysts

July 29, 2026 brings the second-quarter report, and for this company that is the quarter that matters most. The Kentucky Derby lands in the second quarter, so a full year of Derby economics shows up in one print. The first-quarter filing already flagged the setup, noting deferred revenue related to the 152nd Kentucky Derby sitting in contract liabilities at the March balance date. Everything the company earns from the event, from tickets to sponsorship to handle, arrives in the results being reported now.

The first quarter set a constructive tone. Revenue came in at $663 million, marginally ahead of the consensus estimate of $661.9 million, with the company describing record first-quarter revenue and adjusted profitability, and $31 million returned to shareholders during the period. The composition of that growth is the thing to track into the second quarter: Kentucky, Virginia and New Hampshire venues supplied the increase while the racetrack line went slightly backwards.

Sell-side sentiment has been drifting down without changing direction. Wells Fargo cut its price target to $120 from $132 while keeping an Overweight rating, and Jefferies moved to $135 from $138 while keeping a Buy. Two target reductions inside a month with no rating changes is a familiar pattern: the analysts still like the business and have marked down what they think the market will pay for it. Given how much of this equity's value rests on the pace of new venue openings, the more useful signal in the coming print will be the capital-spending commentary rather than the earnings line itself.

Peer Cohorts (Per Segment, With Filing Citations)

Live and Historical Racing / Wagering Services and Solutions (reported)

Gaming (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Churchill Downs quarterly conference call announcement, June 2026 · TheFly analyst notes, July 2026 · Churchill Downs first-quarter 2026 results, April 2026 · TheFly, July 2026

View the full interactive CHDN report on boothcheck