Intrinsic value of Churchill Downs, Incorporated - CHDN

Previous Close

$97.52

  Intrinsic Value

$149.64

stock screener

  Rating & Target

str. buy

+53%

Previous close

$97.52

 
Intrinsic value

$149.64

 
Up/down potential

+53%

 
Rating

str. buy

We calculate the intrinsic value of CHDN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  22.40
  20.66
  19.09
  17.68
  16.42
  15.27
  14.25
  13.32
  12.49
  11.74
  11.07
  10.46
  9.91
  9.42
  8.98
  8.58
  8.22
  7.90
  7.61
  7.35
  7.12
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
Revenue, $m
  1,235
  1,490
  1,775
  2,089
  2,431
  2,803
  3,202
  3,629
  4,082
  4,561
  5,066
  5,596
  6,151
  6,730
  7,335
  7,964
  8,619
  9,300
  10,008
  10,744
  11,508
  12,303
  13,129
  13,988
  14,881
  15,811
  16,779
  17,788
  18,840
  19,936
Variable operating expenses, $m
  797
  946
  1,112
  1,295
  1,495
  1,712
  1,945
  2,195
  2,459
  2,739
  2,958
  3,267
  3,591
  3,930
  4,283
  4,650
  5,033
  5,430
  5,844
  6,273
  6,719
  7,183
  7,666
  8,167
  8,689
  9,232
  9,797
  10,386
  11,000
  11,640
Fixed operating expenses, $m
  161
  165
  169
  172
  176
  180
  184
  188
  192
  196
  201
  205
  210
  214
  219
  224
  229
  234
  239
  244
  250
  255
  261
  266
  272
  278
  284
  291
  297
  304
Total operating expenses, $m
  958
  1,111
  1,281
  1,467
  1,671
  1,892
  2,129
  2,383
  2,651
  2,935
  3,159
  3,472
  3,801
  4,144
  4,502
  4,874
  5,262
  5,664
  6,083
  6,517
  6,969
  7,438
  7,927
  8,433
  8,961
  9,510
  10,081
  10,677
  11,297
  11,944
Operating income, $m
  277
  379
  494
  621
  760
  910
  1,073
  1,246
  1,431
  1,626
  1,907
  2,123
  2,350
  2,586
  2,833
  3,090
  3,358
  3,636
  3,926
  4,227
  4,539
  4,864
  5,203
  5,554
  5,920
  6,301
  6,698
  7,112
  7,543
  7,992
EBITDA, $m
  413
  528
  657
  799
  955
  1,124
  1,305
  1,500
  1,706
  1,925
  2,156
  2,398
  2,651
  2,916
  3,193
  3,481
  3,780
  4,092
  4,416
  4,753
  5,103
  5,468
  5,846
  6,240
  6,650
  7,076
  7,520
  7,983
  8,466
  8,969
Interest expense (income), $m
  40
  48
  63
  80
  99
  120
  143
  168
  195
  223
  254
  286
  320
  355
  392
  431
  472
  514
  558
  603
  651
  700
  751
  805
  860
  918
  977
  1,040
  1,105
  1,172
  1,243
Earnings before tax, $m
  229
  316
  414
  522
  640
  767
  905
  1,051
  1,207
  1,372
  1,622
  1,804
  1,995
  2,194
  2,402
  2,619
  2,844
  3,079
  3,322
  3,576
  3,839
  4,113
  4,398
  4,694
  5,003
  5,324
  5,658
  6,007
  6,370
  6,750
Tax expense, $m
  62
  85
  112
  141
  173
  207
  244
  284
  326
  370
  438
  487
  539
  592
  649
  707
  768
  831
  897
  965
  1,037
  1,111
  1,187
  1,267
  1,351
  1,437
  1,528
  1,622
  1,720
  1,822
Net income, $m
  167
  231
  302
  381
  467
  560
  660
  768
  881
  1,002
  1,184
  1,317
  1,456
  1,602
  1,753
  1,912
  2,076
  2,247
  2,425
  2,610
  2,803
  3,003
  3,210
  3,427
  3,652
  3,886
  4,131
  4,385
  4,650
  4,927

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,111
  2,547
  3,034
  3,570
  4,156
  4,791
  5,474
  6,203
  6,978
  7,797
  8,660
  9,566
  10,514
  11,505
  12,538
  13,614
  14,734
  15,898
  17,108
  18,366
  19,672
  21,030
  22,442
  23,911
  25,438
  27,028
  28,683
  30,407
  32,204
  34,079
Adjusted assets (=assets-cash), $m
  2,111
  2,547
  3,034
  3,570
  4,156
  4,791
  5,474
  6,203
  6,978
  7,797
  8,660
  9,566
  10,514
  11,505
  12,538
  13,614
  14,734
  15,898
  17,108
  18,366
  19,672
  21,030
  22,442
  23,911
  25,438
  27,028
  28,683
  30,407
  32,204
  34,079
Revenue / Adjusted assets
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
  0.585
Average production assets, $m
  1,168
  1,410
  1,679
  1,976
  2,300
  2,651
  3,029
  3,433
  3,862
  4,315
  4,792
  5,294
  5,819
  6,367
  6,939
  7,534
  8,154
  8,798
  9,468
  10,164
  10,887
  11,638
  12,420
  13,232
  14,078
  14,957
  15,873
  16,828
  17,822
  18,859
Working capital, $m
  -226
  -273
  -325
  -382
  -445
  -513
  -586
  -664
  -747
  -835
  -927
  -1,024
  -1,126
  -1,232
  -1,342
  -1,457
  -1,577
  -1,702
  -1,831
  -1,966
  -2,106
  -2,251
  -2,403
  -2,560
  -2,723
  -2,893
  -3,071
  -3,255
  -3,448
  -3,648
Total debt, $m
  1,165
  1,482
  1,835
  2,224
  2,650
  3,111
  3,606
  4,136
  4,698
  5,293
  5,919
  6,577
  7,266
  7,985
  8,735
  9,516
  10,329
  11,174
  12,053
  12,966
  13,914
  14,901
  15,926
  16,991
  18,100
  19,254
  20,456
  21,708
  23,013
  24,373
Total liabilities, $m
  1,533
  1,849
  2,202
  2,592
  3,017
  3,478
  3,974
  4,503
  5,066
  5,661
  6,287
  6,945
  7,633
  8,352
  9,103
  9,884
  10,697
  11,542
  12,420
  13,333
  14,282
  15,268
  16,293
  17,359
  18,468
  19,622
  20,824
  22,076
  23,380
  24,741
Total equity, $m
  578
  698
  831
  978
  1,139
  1,313
  1,500
  1,700
  1,912
  2,136
  2,373
  2,621
  2,881
  3,152
  3,435
  3,730
  4,037
  4,356
  4,688
  5,032
  5,390
  5,762
  6,149
  6,551
  6,970
  7,406
  7,859
  8,332
  8,824
  9,338
Total liabilities and equity, $m
  2,111
  2,547
  3,033
  3,570
  4,156
  4,791
  5,474
  6,203
  6,978
  7,797
  8,660
  9,566
  10,514
  11,504
  12,538
  13,614
  14,734
  15,898
  17,108
  18,365
  19,672
  21,030
  22,442
  23,910
  25,438
  27,028
  28,683
  30,408
  32,204
  34,079
Debt-to-equity ratio
  2.010
  2.120
  2.210
  2.270
  2.330
  2.370
  2.400
  2.430
  2.460
  2.480
  2.490
  2.510
  2.520
  2.530
  2.540
  2.550
  2.560
  2.570
  2.570
  2.580
  2.580
  2.590
  2.590
  2.590
  2.600
  2.600
  2.600
  2.610
  2.610
  2.610
Adjusted equity ratio
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274
  0.274

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  167
  231
  302
  381
  467
  560
  660
  768
  881
  1,002
  1,184
  1,317
  1,456
  1,602
  1,753
  1,912
  2,076
  2,247
  2,425
  2,610
  2,803
  3,003
  3,210
  3,427
  3,652
  3,886
  4,131
  4,385
  4,650
  4,927
Depreciation, amort., depletion, $m
  136
  149
  163
  178
  195
  213
  233
  254
  276
  299
  248
  274
  301
  330
  360
  390
  422
  456
  491
  527
  564
  603
  644
  686
  729
  775
  822
  872
  923
  977
Funds from operations, $m
  303
  380
  465
  559
  662
  773
  893
  1,021
  1,157
  1,301
  1,432
  1,591
  1,758
  1,932
  2,113
  2,302
  2,499
  2,703
  2,916
  3,137
  3,367
  3,606
  3,854
  4,112
  4,381
  4,661
  4,953
  5,257
  5,574
  5,904
Change in working capital, $m
  -41
  -47
  -52
  -57
  -63
  -68
  -73
  -78
  -83
  -88
  -92
  -97
  -102
  -106
  -111
  -115
  -120
  -125
  -130
  -135
  -140
  -145
  -151
  -157
  -164
  -170
  -177
  -185
  -192
  -201
Cash from operations, $m
  345
  426
  517
  617
  725
  841
  966
  1,099
  1,240
  1,389
  1,524
  1,688
  1,859
  2,038
  2,224
  2,417
  2,618
  2,828
  3,045
  3,272
  3,507
  3,751
  4,005
  4,270
  4,545
  4,832
  5,130
  5,442
  5,766
  6,105
Maintenance CAPEX, $m
  -49
  -61
  -73
  -87
  -102
  -119
  -137
  -157
  -178
  -200
  -224
  -248
  -274
  -301
  -330
  -360
  -390
  -422
  -456
  -491
  -527
  -564
  -603
  -644
  -686
  -729
  -775
  -822
  -872
  -923
New CAPEX, $m
  -213
  -241
  -269
  -297
  -324
  -351
  -378
  -404
  -429
  -453
  -478
  -501
  -525
  -548
  -572
  -596
  -620
  -644
  -670
  -696
  -723
  -752
  -781
  -813
  -845
  -880
  -916
  -954
  -995
  -1,037
Cash from investing activities, $m
  -262
  -302
  -342
  -384
  -426
  -470
  -515
  -561
  -607
  -653
  -702
  -749
  -799
  -849
  -902
  -956
  -1,010
  -1,066
  -1,126
  -1,187
  -1,250
  -1,316
  -1,384
  -1,457
  -1,531
  -1,609
  -1,691
  -1,776
  -1,867
  -1,960
Free cash flow, $m
  82
  125
  175
  233
  298
  371
  451
  539
  634
  735
  823
  938
  1,060
  1,188
  1,322
  1,462
  1,609
  1,761
  1,920
  2,085
  2,257
  2,435
  2,621
  2,814
  3,014
  3,222
  3,439
  3,665
  3,900
  4,144
Issuance/(repayment) of debt, $m
  281
  317
  353
  389
  425
  461
  496
  529
  562
  595
  626
  658
  689
  719
  750
  781
  813
  845
  879
  913
  949
  986
  1,025
  1,066
  1,109
  1,154
  1,202
  1,252
  1,305
  1,361
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  281
  317
  353
  389
  425
  461
  496
  529
  562
  595
  626
  658
  689
  719
  750
  781
  813
  845
  879
  913
  949
  986
  1,025
  1,066
  1,109
  1,154
  1,202
  1,252
  1,305
  1,361
Total cash flow (excl. dividends), $m
  363
  441
  528
  622
  723
  832
  947
  1,068
  1,196
  1,330
  1,450
  1,596
  1,748
  1,907
  2,072
  2,243
  2,421
  2,606
  2,798
  2,998
  3,206
  3,421
  3,646
  3,879
  4,123
  4,376
  4,641
  4,917
  5,205
  5,505
Retained Cash Flow (-), $m
  -105
  -120
  -133
  -147
  -161
  -174
  -187
  -200
  -212
  -224
  -236
  -248
  -260
  -271
  -283
  -295
  -307
  -319
  -332
  -345
  -358
  -372
  -387
  -402
  -419
  -436
  -454
  -472
  -492
  -514
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  258
  322
  395
  475
  563
  658
  760
  868
  984
  1,106
  1,213
  1,348
  1,489
  1,636
  1,789
  1,949
  2,115
  2,287
  2,467
  2,653
  2,847
  3,049
  3,259
  3,477
  3,704
  3,941
  4,187
  4,444
  4,712
  4,992
Discount rate, %
  7.20
  7.56
  7.94
  8.33
  8.75
  9.19
  9.65
  10.13
  10.64
  11.17
  11.73
  12.31
  12.93
  13.58
  14.26
  14.97
  15.72
  16.50
  17.33
  18.19
  19.10
  20.06
  21.06
  22.11
  23.22
  24.38
  25.60
  26.88
  28.22
  29.64
PV of cash for distribution, $m
  240
  278
  314
  345
  370
  388
  399
  401
  396
  383
  358
  335
  306
  275
  242
  209
  177
  146
  118
  94
  72
  55
  40
  29
  20
  14
  9
  6
  3
  2
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Churchill Downs Incorporated is a racing, gaming and online entertainment company. The Company is engaged in brick-and-mortar casino gaming with approximately 9,030 gaming positions in seven states, and is a legal mobile and online platform for betting on horseracing in the United States. It operates through six segments: Racing, Casinos, TwinSpires, Big Fish Games, Other Investments and Corporate. Racing includes four racetracks: Churchill Downs Racetrack, Arlington International Race Course, Fair Grounds Race Course and Calder Race Course. Casinos is a provider of brick-and-mortar real-money casino gaming. TwinSpires operates mobile and online wagering business, which is a platform for betting on horseracing. Big Fish Games, Inc. is a producer and distributor of social casino, casual and mid-core free-to-play and premium paid games for personal computer (PC), Mac and mobile devices. Other Investments includes United Tote and Capital View Casino & Resort Joint Venture (Capital View).

FINANCIAL RATIOS  of  Churchill Downs, Incorporated (CHDN)

Valuation Ratios
P/E Ratio 14.9
Price to Sales 1.2
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 9.4
Growth Rates
Sales Growth Rate 8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.6%
Cap. Spend. - 3 Yr. Gr. Rate 1.5%
Financial Strength
Quick Ratio 4
Current Ratio 0.2
LT Debt to Equity 132.6%
Total Debt to Equity 134.6%
Interest Coverage 5
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 4.5%
Return On Total Capital 7.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 16.6%
Return On Equity - 3 Yr. Avg. 11%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 23.9%
Gross Margin - 3 Yr. Avg. 22.8%
EBITDA Margin 25.5%
EBITDA Margin - 3 Yr. Avg. 23.3%
Operating Margin 14.9%
Oper. Margin - 3 Yr. Avg. 12%
Pre-Tax Margin 12.8%
Pre-Tax Margin - 3 Yr. Avg. 10.5%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. 6.4%
Effective Tax Rate 35.7%
Eff/ Tax Rate - 3 Yr. Avg. 39.3%
Payout Ratio 17.6%

CHDN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CHDN stock intrinsic value calculation we used $1009 million for the last fiscal year's total revenue generated by Churchill Downs, Incorporated. The default revenue input number comes from 0001 income statement of Churchill Downs, Incorporated. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CHDN stock valuation model: a) initial revenue growth rate of 22.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.2%, whose default value for CHDN is calculated based on our internal credit rating of Churchill Downs, Incorporated, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Churchill Downs, Incorporated.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CHDN stock the variable cost ratio is equal to 65.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $158 million in the base year in the intrinsic value calculation for CHDN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Churchill Downs, Incorporated.

Corporate tax rate of 27% is the nominal tax rate for Churchill Downs, Incorporated. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CHDN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CHDN are equal to 94.6%.

Life of production assets of 19.3 years is the average useful life of capital assets used in Churchill Downs, Incorporated operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CHDN is equal to -18.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $473.3 million for Churchill Downs, Incorporated - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 40.286 million for Churchill Downs, Incorporated is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Churchill Downs, Incorporated at the current share price and the inputted number of shares is $3.9 billion.

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