Value
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.5 |
| P/S | 8.9 |
| EV/EBITDA | 4.9 |
| Fwd P/E | 8.8 |
| PEG | 7.4 |
| Analyst target | 9.0 |
- ▸Forward P/E: 12.6x
- ▸PEG: 0.94
- ▸Attractively valued
CHDN · Why this verdict
Why Churchill Downs (CHDN) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
With a debt-to-equity ratio of 4.4x, leverage is high, amplifying downside risk if operating cash flows soften and leaving limited financial flexibility — a concern that is compounded by the weak free cash flow conversion noted above. Bear case | Debt-to-equity falls below 3.0x within 12 months through debt repayment or meaningful equity value expansion, indicating material deleveraging. | →Stable |
| CounterA rich multiple can compress the debt-to-equity ratio mechanically as equity value rises; if the business generates stable cash flows and the equity price recovers toward analyst targets, leverage may decline without requiring active debt repayment. | ||
Shares trade at a forward price-to-earnings of 12.7x with a PEG ratio of 0.95, implying the market is pricing in little incremental growth despite analyst consensus pointing to 29% upside from current levels at a favorable risk/reward of 4.6-to-1. Valuation breakdown | The stock price closes within 10% of the analyst consensus price target of $119.41 within 12 months. | →Stable |
| CounterA low forward multiple paired with a confirmed downtrend often reflects a deteriorating earnings outlook rather than a mispricing; if estimates are revised lower, the apparent discount narrows or disappears without any price recovery. | ||
Free cash flow represents only 32% of net income — flagged as a quality red flag — meaning reported earnings substantially overstate the cash the business actually generates, which in turn constrains the capacity to service elevated debt. Quality breakdown | Free cash flow as a percentage of net income rises above 60% for 2 consecutive quarters, signaling a meaningful improvement in earnings quality. | →Stable |
| CounterA temporarily low free-cash-flow-to-net-income ratio can reflect an investment cycle or working-capital buildup that reverses in subsequent periods; if deployment of capital is generating future returns, the current period may understate normalized earning power. | ||
The stock is below its 200-day moving average with the average declining at 2.6% over the past 30 days, and the put-to-call ratio stands at 11.1 — an unusually elevated level of downside hedging that signals institutional concern about near-term price risk. Risk breakdown | Price reclaims the 200-day moving average and sustains it for 15 consecutive trading days, and the put-to-call ratio falls below 2.0, confirming the bearish setup has resolved. | →Stable |
| CounterMACD is improving and RSI has moved to 70 with a volume surge on up moves, suggesting the downtrend may be in the early stages of reversing; momentum recovery sometimes precedes a 200-day moving average reclaim by weeks. | ||
With a debt-to-equity ratio of 4.4x, leverage is high, amplifying downside risk if operating cash flows soften and leaving limited financial flexibility — a concern that is compounded by the weak free cash flow conversion noted above.
→StableBear case
- Expectation
- Debt-to-equity falls below 3.0x within 12 months through debt repayment or meaningful equity value expansion, indicating material deleveraging.
CounterA rich multiple can compress the debt-to-equity ratio mechanically as equity value rises; if the business generates stable cash flows and the equity price recovers toward analyst targets, leverage may decline without requiring active debt repayment.
Shares trade at a forward price-to-earnings of 12.7x with a PEG ratio of 0.95, implying the market is pricing in little incremental growth despite analyst consensus pointing to 29% upside from current levels at a favorable risk/reward of 4.6-to-1.
→StableValuation breakdown
- Expectation
- The stock price closes within 10% of the analyst consensus price target of $119.41 within 12 months.
CounterA low forward multiple paired with a confirmed downtrend often reflects a deteriorating earnings outlook rather than a mispricing; if estimates are revised lower, the apparent discount narrows or disappears without any price recovery.
Free cash flow represents only 32% of net income — flagged as a quality red flag — meaning reported earnings substantially overstate the cash the business actually generates, which in turn constrains the capacity to service elevated debt.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income rises above 60% for 2 consecutive quarters, signaling a meaningful improvement in earnings quality.
CounterA temporarily low free-cash-flow-to-net-income ratio can reflect an investment cycle or working-capital buildup that reverses in subsequent periods; if deployment of capital is generating future returns, the current period may understate normalized earning power.
The stock is below its 200-day moving average with the average declining at 2.6% over the past 30 days, and the put-to-call ratio stands at 11.1 — an unusually elevated level of downside hedging that signals institutional concern about near-term price risk.
→StableRisk breakdown
- Expectation
- Price reclaims the 200-day moving average and sustains it for 15 consecutive trading days, and the put-to-call ratio falls below 2.0, confirming the bearish setup has resolved.
CounterMACD is improving and RSI has moved to 70 with a volume surge on up moves, suggesting the downtrend may be in the early stages of reversing; momentum recovery sometimes precedes a 200-day moving average reclaim by weeks.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Churchill Downs offers a compelling 29% upside to analyst consensus at a forward multiple of 12.7x with a PEG ratio near 1, but the stock sits in a confirmed downtrend, carries debt-to-equity of 4.4x, and converts only 32% of net income into free cash flow — a combination that demands the technical picture improve before the valuation gap can close.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.2 |
| Gross margin | 2.8 |
| Op margin | 8.7 |
| Net margin | 6.6 |
| Current ratio | 2.2 |
| FCF quality | 2.6 |
| Moat | 4.9 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 35%
- ▸Earnings quality RED FLAG: 32% FCF/NI
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 7/9
Growth
4.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.3 |
| EPS growth | 4.7 |
Momentum
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 1.6 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -2.1%/30d — confirmed downtrend
Sentiment
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 8.4 |
| Price target | 9.6 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 51%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
5.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.5 |
| quality rank | 8.1 |
| growth rank | 1.3 |
- ▸Attractive P/E vs peers
- ▸Best-in-class margins
Technical
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.6 |
| support resistance | 2.9 |
| 52w position | 5.4 |
Risk (lower is worse)
4.3/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.9 |
| days to cover | 5.5 |
| volatility | 3.2 |
| put call | 0.0 |
| implied vol | 5.0 |
| beta | 9.0 |
| debt equity | 0.6 |
- ▸Elevated put/call: 16.57
Catalyst
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 6.1 |
| dividend safety | 7.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 48.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (8)
- MOMENTUM:6.4>=5.5
- ASYMMETRY:3.8>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:26d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (0)
none
Warning (1)
- DEATH_CROSS:momentum=6.4>=5.0 recovering
Reward-to-Risk
3.77
Upside
+31.3%
Downside
8.3%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 58
EdgeCatalyst-Driven — Earnings in 26d with 3/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 7.9) was not enough to lift the adjusted overall above the threshold. Current asymmetry R:R is 3.77 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 7.9, Sentiment at 7.9, and Momentum at 6.4; the weakest are Technical at 3.3, Growth at 4.0, and Risk (lower is worse) at 4.3. The V9 engine cleared all gates with 1 warning, producing an asymmetric reward-to-risk of 3.77 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Attractive Valuation Material Upside
Trip ifAnalyst consensus price target falls below $100, reducing perceived upside to less than 10% from current levels.
- P2Weak Free Cash Flow Conversion
Trip ifFree cash flow as a percentage of net income rises above 60% for 2 consecutive quarters.
- P3Elevated Debt Load
Trip ifDebt-to-equity ratio falls below 3.0x.
- P4Downtrend With Extreme Options Hedging
Trip ifPrice closes above the 200-day moving average for 15 consecutive trading days and the put-to-call ratio falls below 2.0.