Value
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.9 |
| P/S | 8.8 |
| EV/EBITDA | 5.1 |
| Fwd P/E | 8.6 |
| PEG | 7.8 |
| Analyst target | 6.0 |
- ▸Forward P/E: 13.1x
- ▸PEG: 0.87
- ▸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. How we score · Editorial policy
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. People who build TrendMatrix, or entities they control, may hold positions, long or short, in securities it covers, and may trade them at any time. Positions are not disclosed individually. Verdicts are generated by an automated model applied by the same rules to every covered stock, and are not adjusted for any position held by the people who build TrendMatrix. We do not accept payment from issuers for coverage.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictSELL
Overall score6.2/10
ConfidenceHIGH
MacroRISK_OFF
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.
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. | ↑Improving |
| 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. | ↓Deteriorating |
| 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. | ↑Improving |
| 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. | ↑Improving |
| 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.
↑ImprovingBear 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.
↓DeterioratingValuation 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.
↑ImprovingQuality 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.
↑ImprovingRisk 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.
Per-dimension breakdown
Quality
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 4.3 |
| Gross margin | 2.8 |
| Op margin | 8.4 |
| Net margin | 7.6 |
| Current ratio | 1.3 |
| FCF quality | 5.6 |
| Moat | 4.9 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 37%
- ▸Strong margins: 15%
- ▸Earnings quality warning: 74% FCF/NI
- ▸No competitive moat
Growth
6.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.0 |
| EPS growth | 10.0 |
Momentum
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.9 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 7.5 |
| Volume | 2.9 |
- ▸Overbought (RSI 81)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat/negative + RSI 81 (late-cycle distribution risk)
Sentiment
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.6 |
| Analyst rating | 8.4 |
| Price target | 8.6 |
- ▸LLM news sentiment: +0.32 (n=5)
- ▸Analyst upside: 30%
Insider
7.0/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 9.1 |
| notable moves | 7.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
3.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.0 |
| quality rank | 8.1 |
| growth rank | 2.5 |
- ▸Best-in-class margins
Technical
2.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.9 |
| 52w position | 6.5 |
Risk (lower is worse)
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.8 |
| days to cover | 6.4 |
| volatility | 3.8 |
| put call | 10.0 |
| implied vol | 5.7 |
| beta | 8.4 |
| debt equity | 1.6 |
| news risk | 6.0 |
Catalyst
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 5.9 |
| dividend safety | 8.5 |
| news activity | 8.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend aristocrat: 0.5% yield
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:6.9>=5.5
- INSIDER:OK
- NEWS_BOOST:ANALYST:0.70
- EARNINGS_PROXIMITY:112d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.9<1.5@spot
Warning (2)
- DEATH_CROSS:momentum=6.9>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.87
Upside
+13.0%
Downside
15.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 81
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 3.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Sentiment at 7.9) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.9<1.5@spot) reinforce the read. Current asymmetry R:R is 0.87 — supplementary context, not the trigger for this path.
The strongest dimensions are Sentiment at 7.9, Value at 7.4, and Insider at 7.0; the weakest are Technical at 2.5, Peer rank at 3.6, and Quality at 5.9. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of 0.87 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.