Is Wall Street Undervaluing CHDN Stock?

Here is why we think Churchill Downs (CHDN) deserves consideration as a value stock.

• Reasonable Revenue Growth: 8.2% LTM and 18.7% last 3 year average.
• Cash Generative: Nearly 12.9% free cash flow margin and 24.9% operating margin LTM.
• No Major Shocks: CHDN has avoided any revenue collapses in the last 3 years.
• Modest Valuation: Despite encouraging fundamentals, CHDN trades at a PE multiple of 17.7
• Opportunity vs S&P: Compared to S&P, you get lower valuation, higher revenue growth, and better operating margins

As a quick background, Churchill Downs operates as a racing, online wagering, and gaming entertainment company, managing pari-mutuel venues with thousands of historical racing machines across three business segments.

*LTM: Last Twelve Months

But do these numbers tell the full story? Read Buy or Sell CHDN Stock to see if Churchill Downs still has an edge that holds up under the hood.

That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure

Stocks Like These Can Outperform. Here Is Data

For 65 similar value stocks chosen as of mid 2024, consider the following stats for the subsequent 1 year period.

• Average peak return of 39.3% vs 14.4% for S&P, with maximum peak return of 133%
• Win rate of 60%; win rate represents % of stocks with positive return
• Average 1-year return of 14.6%, similar to S&P’s despite tariff instability

But Consider The Risk

That said, CHDN isn’t immune to big downturns. It fell nearly 49% in the Dot-Com crash and over 60% during both the Global Financial Crisis and the Covid selloff. The 2018 correction wasn’t gentle either, with a dip around 27%, while the inflation shock pushed it down about 32%. Sure, solid fundamentals matter, but when the market heads south, CHDN can take a serious hit.

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read CHDN Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.