CHDN

We rate Churchill Downs Inc (CHDN) as a Hold with a composite score of 51.3/100 at a current price of $96.16. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (87th percentile) and momentum (57th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a No Moat rating (21/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Churchill Downs Inc holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 51.3/100 places it at rank #1817 in our full 7,333-stock universe. At $6.8B in market capitalization, Churchill Downs Inc is a mid-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -23% combined with momentum at the 57th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 30% (-29.6pp vs sector) narrow to operating margins of 23% (+19.1pp vs sector) and net margins of 12.9%, yielding a gross-to-net conversion rate of 43%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $96.16, Churchill Downs Inc is trading near fair value based on current fundamentals. Our value factor score of 53/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 16.3x (a 31% discount to the sector median of 23.7x), EV/EBITDA of 7.2x (discounted to peers), P/B of 6.3x, P/S of 2.3x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to Churchill Downs Inc. The stock presents a balanced risk profile: significant leverage (616% debt-to-equity) and low beta of 0.62 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (616% debt-to-equity); low beta of 0.62 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 87th percentile and quality factor at the 41th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (87th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Churchill Downs Inc's capital allocation as Poor. Key concerns include elevated leverage (616% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Churchill Downs Inc significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Churchill Downs Inc receives a Hold rating with a composite score of 51.3/100 (rank #1817 of 7,333). Our quantitative framework assigns a No Moat (21/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 55/100.

Our analysis supports a neutral stance on Churchill Downs Inc. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.