Churchill Downs Incorporated (NASDAQ:CHDN) saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$145 and falling to the lows of US$128. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Churchill Downs' current trading price of US$138 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Churchill Downs's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What's The Opportunity In Churchill Downs?

Churchill Downs is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Churchill Downs's ratio of 24.91x is above its peer average of 19.73x, which suggests the stock is trading at a higher price compared to the Hospitality industry. In addition to this, it seems like Churchill Downs's share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Churchill Downs generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 38% over the next couple of years, the future seems bright for Churchill Downs. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? CHDN's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CHDN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping tabs on CHDN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for CHDN, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Churchill Downs, you'd also look into what risks it is currently facing. In terms of investment risks, we've 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 see our list of over 50 other stocks with a high growth potential.

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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.