Is Churchill Downs a Bargain After Shares Dropped More Than 30% in 2025?

If you have been staring at Churchill Downs stock, weighing whether to wait out the losses or jump in for a potential rebound, you are not alone. The company has faced significant pressure this year, with shares down 31.6% year-to-date and off 35.1% over the last twelve months. That is not a typo, and it is natural to feel cautious when the recent 7-day and 30-day returns have also been negative, falling by 6.2% and 6.5% respectively. Long-term holders see only a modest 5.2% gain over five years, making this a stock that demands careful scrutiny.

So, what is moving the price? Industry-wide cautiousness appears to be a big part of the story, with shifting market sentiment around gaming and entertainment companies adding to the volatility. Investors have become more sensitive to risk, and that has affected stocks like Churchill Downs, even in the absence of dramatic company-specific news.

At today's closing price of 90.02, the big question is whether Churchill Downs is starting to look attractively undervalued. According to our valuation score, and this is not something we see every day, the company checks all the boxes, scoring a 6 out of 6. That means Churchill Downs appears undervalued on every key metric we examine, based on established valuation checks.

Of course, there are many ways to measure a company’s true value, and not all methods tell the same story. In the next section, I will walk through these different valuation approaches and explain what the 6 out of 6 score really means. Plus, stick around for a deeper perspective that goes beyond the numbers alone.

Why Churchill Downs is lagging behind its peers

Approach 1: Churchill Downs Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic worth by projecting its future cash flows and discounting those values back to today, capturing the time value of money. This approach allows investors to gauge whether the current share price reflects those future possibilities.

For Churchill Downs, the latest reported Free Cash Flow is $176.6 Million. According to analyst estimates and forecasts from Simply Wall St, free cash flow is expected to grow steadily, reaching $645.9 Million in 2026 and further climbing to $954.5 Million by 2035. While analyst estimates extend only a handful of years, further projections are extrapolated to provide a fuller picture of potential long-term cash generation.

This DCF analysis yields an estimated intrinsic value of $135.66 per share for Churchill Downs. Compared to its current share price of $90.02, the DCF indicates that Churchill Downs is trading at a 33.6% discount. This suggests a significant undervaluation based purely on its expected cash generation.

Bottom line, the DCF model points to a stock that looks attractively undervalued relative to its fundamentals.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Churchill Downs.

Our Discounted Cash Flow (DCF) analysis suggests Churchill Downs is undervalued by 33.6%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Churchill Downs Price vs Earnings

Price-to-Earnings (PE) is the preferred valuation multiple for profitable companies like Churchill Downs because it directly relates what investors are willing to pay for each dollar of earnings. For businesses that consistently generate positive profits, the PE ratio offers a straightforward gauge of value, reflecting both performance today and expectations for the future.

Of course, what counts as a “normal” or “fair” PE ratio depends heavily on expectations for growth and risk. Companies anticipating rapid earnings growth, or those perceived as low-risk, often trade at higher multiples. Slower-growing or riskier firms generally see lower PE ratios. These benchmarks help investors judge if a stock’s price makes sense compared to its future prospects and its competitive landscape.

Currently, Churchill Downs trades at a PE ratio of 14.7x, noticeably below the industry average of 23.1x and its peer group average of 33.2x. Simply Wall St’s Fair Ratio, a proprietary measure that considers Churchill Downs’ earnings growth, profit margins, current risks, industry, and market cap, comes in at 20.9x. Unlike a basic industry or peer comparison, the Fair Ratio provides a more tailored benchmark that captures the nuances of Churchill Downs’ unique situation. This ensures the comparison is not just apples to apples, but apples to your apple.

Since the company’s actual PE of 14.7x is meaningfully below the Fair Ratio of 20.9x, the stock appears undervalued based on this approach.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Churchill Downs Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple way of sharing your personal perspective on a company, combining your views on its future revenue, earnings, and margins to build your own story behind the numbers.

With Narratives, you anchor a specific viewpoint, tie it directly to a financial forecast, and arrive at your own fair value, transforming investment from a numbers game into a dynamic, story-driven process. This approach is both powerful and accessible. You can easily create, update, and compare Narratives on Simply Wall St’s Community page, used by millions of investors worldwide.

By building or exploring Narratives, you can instantly see how fair value compares to today’s share price, helping you decide if it’s a good time to buy, hold, or sell. As new company announcements or earnings are released, Narratives are updated for you so your investment thesis remains current.

For example, some Churchill Downs Narratives expect a price target of $155.00, based on strong growth from new Derby experiences and digital wagering, while others target just $125.00, reflecting concern over competition and regulatory risks. The tool lets you track and test your own view against both.

Do you think there's more to the story for Churchill Downs? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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