Churchill Downs Inc (CHDN): what the price requires
At today's price, Churchill Downs Inc (CHDN) is priced for -4.7% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CHDN
Headline
| Field | Value |
|---|---|
| Ticker | CHDN |
| Company | Churchill Downs Inc |
| Current price | $83.67/sh |
| Composition | Live and simulcast racing 17% / Historical racing 35% / Racing event-related services 6% / Gaming 31% / Other 11% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 7.4% |
| Operating margin today | 24.1% |
| Margin compression implied | -16.7pp |
| Implied growth | -4.7% |
| Multiple paid | 15x operating income |
The operating-margin requirement is derived from the framework's value band at year 8, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.3% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.8pp.
Reconcile: at the x-ray's 9.3% required return this reads ~8%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.80σ |
| cohort percentile (of 32 peers) | 34 |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple and growth-DCF value, while earnings-power lands below the price. A value/asset-supported name, not a pure growth bet.
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.14x | 4 | expensive |
| Earnings | 2.17x | 1 | expensive |
| Relative | 0.99x | 3 | justifies |
| Growth | 1.08x | 2 | expensive |
Families that justify the price: Asset, Relative, Growth Families that call it expensive: Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.5%); the inversion above states its own rate.
Per-Model Detail (n=10)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| DCF Exit Multiple | Growth | $94.58 | 0.88x | yes | Exit EV/EBITDA: 9.5x / 11.5x / 13.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $84.18 | 0.99x | yes | P/S fallback (negative EPS): Sector P/S 2.0x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $60.12 | 1.39x | yes | BV/sh $15.66, ROE (TTM) 35.5%, ke 9.3% |
| Two-Stage Excess Return | Asset | $126.32 | 0.66x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $65.54 | 1.28x | yes | Rev $2.9B, growth 6% (input: historical growth; tapered), Terminal P/S: 1.7x / 2.0x / 2.3x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $38.61 | 2.17x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.56B × (1−27%) / WACC 5.5% → EPV (no growth) |
| Residual Income | Asset | $93.86 | 0.89x | yes | BV $15.66 + 5yr PV of (ROE (TTM) 35.5% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $51.01 | 1.64x | yes | EBITDA $0.92B × sector EV/EBITDA 9.0x |
| FCF Yield | Earnings | $0.01 | 8366.50x | yes | FCF $295.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median) |
| SBC-Adj FCF Yield | Earnings | $0.01 | 8366.50x | yes | SBC-adj FCF $0.26B (FCF $0.29B − SBC $0.03B) capitalized at Kₑ (excluded from median) |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | $5.12 | 16.34x | yes | BV $15.66 × (ROIC 1.8% / WACC 5.5%) |
| P/Sales Sector | Relative | $84.18 | 0.99x | yes | Revenue $2.95B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $5.0b |
| Net debt / NOPAT (after-tax) | 9.59x |
| Net debt / operating income (pre-tax) | 7.04x |
| Interest coverage | 2.4x |
| Share count CAGR (buyback) | -2.5% |
| Burning cash | no |
Bullet Takeaways
At $88.28 the price pays about 16x company-wide operating income, which inverts to roughly negative 3% operating-profit growth per year for five years. In other words, the market is pricing Churchill Downs as a business in slow decline, while the company is actually setting records.
The recent results contradict that pessimism. Q1 2026 delivered record earnings with EPS of $1.21 against a $1.02 estimate, revenue of $663 million, and adjusted EBITDA of $257 million, led by historical racing machines and the irreplaceable Kentucky Derby franchise.
The one thing the cheap multiple is genuinely weighing is the balance sheet. Net debt sits near $4.9 billion against trailing operating income of about $692 million, roughly 7x, with interest coverage near 2.3x, and the company is funding ambitious growth projects. The bet is that the unique assets keep compounding faster than the implied decline while the debt is worked down.
Bull Case
What the market is pricing into Churchill Downs is decline, and the fundamentals say the opposite. At about 16x operating income the price implies roughly negative 3% operating-profit growth for five years, yet Q1 2026 produced record earnings: EPS of $1.21 beat the $1.02 estimate by nearly 19%, revenue reached $663 million, and adjusted EBITDA was $257 million. The stock surged on the print. A business growing into records while priced for shrinkage is the classic setup where the market and the fundamentals have diverged, and the bull case is that the fundamentals win.
The core of the franchise is genuinely irreplaceable, which is the heart of the bull thesis. Churchill Downs owns the Kentucky Derby, and the 10-K notes the 151st running 'generated all-time handle records for the Kentucky Derby Race, Kentucky Derby Day Program, and Kentucky Derby Day,' with the live and historical racing segment posting adjusted EBITDA of $637.0 million, up 10.9% (FY2025 10-K, accession 0000020212-26-000025). There is exactly one Kentucky Derby, and the company is investing to monetize it more deeply each year. Alongside it, the historical racing machine (HRM) business is a structural growth engine: Kentucky HRM adjusted EBITDA rose more than 17% year over year, and the company opened its eighth Kentucky HRM venue, with these gaming-adjacent venues funded by and tied to the racing franchise.
The third leg is the diversified, cash-generative model and the growth pipeline. The business spans live and historical racing, gaming, and the TwinSpires online wagering and United Tote services segment, which the filing describes as the wagering services and solutions business. That mix produced $295 million of operating cash flow in Q1, which funded $59 million of capital expenditures and reduced revolver borrowings simultaneously. The company is investing $180 to $200 million in the Rockingham Grand Casino in New Hampshire for a mid-2027 opening, a self-funded expansion into a new market. For a buyer who believes the Derby and the HRM rollout keep compounding, a low-to-negative-growth price on a record-setting business with unique assets is an attractive mispricing.
Bear Case
The capital-allocation and balance-sheet concern is the legitimate reason the cheap multiple may be deserved. Churchill Downs carries net debt of about $4.9 billion against trailing operating income near $692 million, a leverage ratio around 7x, with interest coverage of only about 2.3x. That is a heavily levered business, and the company is layering ambitious capital projects on top, most notably the $180 to $200 million Rockingham Grand Casino plus the ongoing HRM venue build-out. The bull case frames the capex as self-funding growth, but the bear case notes that a company this levered has little room for a project that runs over budget, opens late, or underperforms, and that the upcoming 2027 to 2028 note maturities plus a large term loan and revolver mean refinancing risk in a higher-rate world. Heavy capex and heavy debt together leave thin margin for error.
The second issue is the cyclicality and regulatory dependence the leverage amplifies. Gaming, historical racing, and discretionary entertainment spending are all economically sensitive: a consumer pullback would hit handle, HRM revenue, and casino visitation at once, and a 2.3x interest coverage ratio does not absorb a demand shock comfortably. More structurally, the HRM growth engine, the single biggest driver of recent earnings gains, depends on favorable state regulation. Historical racing machines exist in a legal gray zone in several jurisdictions; the Louisiana HRM contribution was already lost in the period, a concrete reminder that the regulatory tailwind can reverse. If a key state restricts or bans HRMs, a major growth pillar disappears, and the levered equity feels it disproportionately.
The third risk is concentration and the limits of the marquee asset. The Kentucky Derby is irreplaceable, but it is also one event a year, and the company's valuation increasingly rests on the gaming and HRM businesses that compete with regional casinos and face the same saturation and regulatory dynamics as any gaming operator. The earnings-power methods read the price as expensive (Earnings Power Value near $37, EV/EBITDA-relative near $51), and the cash-flow-yield methods are pinned near zero because the heavy capex and debt service consume free cash flow. That last point is the crux: a business spending heavily to grow and servicing a large debt load generates little free cash today, so the equity holder is betting that the projects pay off before the leverage or a downturn forces the issue. At 7x net-debt-to-operating-income, the implied negative-growth price is not necessarily a bargain; it may be the market correctly discounting the financial risk that sits underneath the record headline earnings.
Valuation
Churchill Downs inverts to a pessimistic price. At about 16x company-wide operating income, the quote implies roughly negative 3% operating-profit growth per year for five years, computed at a 7.4% cost of capital with 4% terminal growth. The market is effectively pricing modest decline, which is striking for a business posting record earnings, and the gap between that implied decline and the actual record results is the central tension of the name.
The method families bracket the price closely. The growth and relative-multiple methods land at or above the quote (DCF exit-multiple near $98, relative valuation and P/Sales near $84, residual income near $94), while the earnings-power and EV/EBITDA methods land below (Earnings Power Value near $37, EV/EBITDA-relative near $51), and the cash-flow-yield methods are effectively zero because heavy capital expenditure and debt service consume free cash flow. The two-stage excess-return method reaches up near $126. So on grounded methods the business looks fairly valued to modestly cheap, with the disagreement concentrated exactly where it should be: the multiple-and-growth methods see the record-setting franchise, while the cash-flow methods see the leverage and capex draining current free cash flow. The valuation question is therefore a referendum on the balance sheet. If the Derby and HRM growth keep compounding and the debt comes down as projects mature into cash flow, the negative-growth implied price is a clear discount on unique assets. If a regulatory setback on HRMs, a consumer downturn, or a capex overrun strains the 7x-levered balance sheet, the cheap multiple is the market pricing real financial risk, and the earnings-power methods near $37 to $51 are the downside the leverage creates.
Catalysts
The Q1 2026 report was the recent catalyst and it was a record. EPS of $1.21 beat the $1.02 estimate by nearly 19%, revenue reached $663 million, adjusted EBITDA was $257 million, and the stock surged. Kentucky HRM adjusted EBITDA rose more than 17% year over year on the Western and Northern Kentucky properties and the new Marshall Yards location, and the company opened its eighth Kentucky HRM venue. Operating cash flow of $295 million funded $59 million of capex and reduced revolver borrowings, cutting total debt to $4.95 billion. The annual Kentucky Derby is the signature seasonal catalyst, and FY2025 set all-time handle records, so Derby-week results each spring are a key earnings event.
The forward catalysts are the growth projects and the regulatory and consumer backdrop. The $180 to $200 million Rockingham Grand Casino in New Hampshire, targeted for a mid-2027 opening, and the continued HRM venue rollout are the growth pipeline to watch, along with progress on reducing leverage ahead of the 2027 to 2028 note maturities. The largest risk catalyst is HRM regulation: historical racing machines drive much of the recent growth and depend on favorable state law, and the lost Louisiana HRM contribution shows how quickly that can change. Consumer spending on gaming and entertainment is the cyclical variable. For a record-setting but heavily levered business priced for decline, the catalysts that re-rate it are continued earnings records, deleveraging, on-time and on-budget delivery of new projects, and stable HRM regulation; the risks are a regulatory crackdown, a consumer pullback, or a capex or refinancing strain.
Sources: Churchill Downs Q1 2026 record earnings, stock surges (Investing.com), Churchill Downs Q1 2026 revenue and earnings rise (StockTitan), Churchill Downs Q1 2026 earnings transcript (Motley Fool), Churchill Downs FY2025 10-K.
Peer Cohorts (Per Segment, With Filing Citations)
Live and Historical Racing / Wagering Services and Solutions (reported)
- LVS (LAS VEGAS SANDS CORP)
- (no filing in the citation store)
- WYNN (WYNN RESORTS LTD)
- (no filing in the citation store)
- BYD (BOYD GAMING CORP)
- (no filing in the citation store)
- RRR (RED ROCK RESORTS, INC.)
- (no filing in the citation store)
- MGM (MGM Resorts International)
- (no filing in the citation store)
- CZR (CAESARS ENTERTAINMENT, INC.)
- (no filing in the citation store)
Gaming (reported)
- PENN (PENN Entertainment, Inc.)
- (no filing in the citation store)
- BYD (BOYD GAMING CORP)
- (no filing in the citation store)
- CZR (CAESARS ENTERTAINMENT, INC.)
- (no filing in the citation store)
- MGM (MGM Resorts International)
- (no filing in the citation store)
- RRR (RED ROCK RESORTS, INC.)
- (no filing in the citation store)
- DKNG (DRAFTKINGS INC.)
- (no filing in the citation store)
- RSI (Rush Street Interactive, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
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.