What does the stock price of Churchill Downs Incorporated (NASDAQ:CHDN) indicate?

Churchill Downs Incorporated (NASDAQ:CHDN), may not be a large-cap stock, but it has received a lot of attention due to substantial price movement on the NASDAQGS over the past few months, rising to US$257 at any given time, and falling to the minimum of US$213. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. A question that needs to be answered is whether the current Churchill Downs trading price of US$213 reflects the true value of mid cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Churchill Downs based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Churchill Downs

What is the opportunity at Churchill Downs?

Churchill Downs is currently expensive based on my multiple price model, where I look at the company’s price-earnings ratio against the industry average. I used the price/earnings ratio in this case because there is not enough visibility to predict its cash flow. The stock ratio of 36.1x is currently well above the industry average of 27.06x, meaning it is trading at a higher price compared to its peers. But is there another opportunity to buy cheap in the future? Since Churchill Downs share is quite volatile (i.e. its price movements are amplified relative to the rest of the market), this could mean that the price may drop, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator of stock price volatility.

What kind of growth will Churchill Downs generate?

NasdaqGS: CHDN Earnings and Revenue Growth January 17, 2022

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Buying a big company with solid prospects at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Profits at Churchill Downs over the next few years are expected to double, indicating a very optimistic future. This should lead to higher cash flow, fueling higher share value.

What does this mean to you :

Are you a shareholder? It looks like the market has well and truly priced in the positive outlook for CHDN, with the stock trading above industry price multiples. At this current price, shareholders may ask a different question: should I sell? If you think CHDN should be trading below its current price, selling at a high price and buying it back when its price falls towards the industry PE ratio can be profitable. But before making this decision, see if its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CHDN for a while, now might not be the best time to get into the stock. The price has outpaced its industry peers, which means there are likely to be no more benefits from poor pricing. However, the optimistic outlook is encouraging for CHDN, which means that it is worth digging into other factors in order to take advantage of the next price drop.

In light of this, if you want to do more analysis on the company, it is essential to be aware of the risks involved. In terms of investment risks, we have identified 1 warning sign with Churchill Downs, and understanding it should be part of your investment process.

If you are no longer interested in Churchill Downs, you can use our free platform to view our list of over 50 other stocks with high growth potential.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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