What is CHDN's Intrinsic value?

Churchill Downs Inc (CHDN) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Churchill Downs Inc's estimated intrinsic value ranges from $101.68 to $210.30 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $210.30 +125.7%
Discounted Cash Flow (5Y) $158.11 +69.7%
Dividend Discount Model (Multi-Stage) $119.05 +27.8%
Dividend Discount Model (Stable) $101.68 +9.1%

Is Churchill Downs Inc (CHDN) undervalued or overvalued?

With the current market price at $93.17, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Churchill Downs Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.57 0.7
Cost of equity 6.5% 8.8%
Cost of debt 6.0% 7.5%
Tax rate 26.9% 27.7%
Debt/Equity ratio 0.7 0.7
After-tax WACC 5.6% 7.4%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.5% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $2,734 (FY12-2024) to $5,305 (FY12-2034)
  • Net profit margin expansion from 16% to 20%
  • Capital expenditures maintained at approximately 20% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $158 $16,123M 82.0%
10-Year Growth $210 $19,893M 68.8%
5-Year EBITDA $139 $14,770M 80.4%
10-Year EBITDA $189 $18,367M 66.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 7.3%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.6%
  • Long-term growth rate: 2.0%
  • Fair value: $119.05 (27.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.8% (Low) to 6.5% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $53 to $151
  • Selected fair value: $101.68 (9.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $6730M
Enterprise Value $11432M
Trailing P/E 15.91
Forward P/E 13.98
Trailing EV/EBITDA 9.10
Current Dividend Yield 43.25%
Dividend Growth Rate (5Y) 5.69%
Debt-to-Equity Ratio 0.70

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $63.09
Discounted Cash Flow (5Y) 28% $39.53
Dividend Discount Model (Multi-Stage) 22% $23.81
Dividend Discount Model (Stable) 17% $15.25
Weighted Average 100% $157.42

Investment Conclusion

Based on our comprehensive valuation analysis, Churchill Downs Inc's weighted average intrinsic value is $157.42, which is approximately 69.0% above the current market price of $93.17.

Key investment considerations:

  • Strong projected earnings growth (16% to 20% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 5.69%

Given these factors, we believe Churchill Downs Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.