Louisville, Kentucky – Churchill Downs, the renowned owner of the Kentucky Derby, stands as a diversified gaming operator with a rich historical background. Despite a period of consolidation over the past 3 years, the company has seen growth in both revenue and net income, offering potential for long-term investors to seize an opportunity at a reasonable price.

Initially established in 1875 in Louisville as a single racetrack, Churchill Downs has evolved into a holding company with seven racetracks under its umbrella. Notably, the upcoming 150th edition of the Kentucky Derby set for May 3rd and 4th, 2024 marks a significant milestone in its illustrious history.

With three main operating segments, Churchill Downs generates revenue from live and historical racing, online horse wagering through TwinSpires, and traditional gaming activities in its casinos. The company’s track record showcases consistent revenue growth and value creation, reflecting a compound annual growth rate of 12.55% over the past 14 years.

Despite facing stagnation in its stock price since 2021, Churchill Downs has demonstrated continued revenue and operating income growth. This growth has led to a contraction in key multiples such as price-to-sales and price-to-earnings ratios, making the stock more attractive to investors.

Looking ahead, Churchill Downs’ strategic investments across its operating segments indicate a commitment to driving future growth. With recent expenditures nearing $1 billion to enhance the Kentucky Derby experience, open new HRM venues, and launch a new casino, the company is poised for expansion over the next decade.

While the company’s high debt load poses a challenge, management aims to maintain leverage levels within a manageable range. By focusing on enhancing operational efficiency, Churchill Downs can navigate its debt obligations while sustaining its profitability and cash flow.

Analyzing the company’s expected value, taking into account its historical performance and ongoing growth investments, Churchill Downs appears undervalued by approximately 17%. This assessment underscores the potential for long-term investors to capitalize on the company’s growth prospects.

In comparison to its peers, Churchill Downs’ diversified operations, strong revenue growth, and profitability metrics position it favorably within the industry. Despite potential risks related to live event disruptions and regulatory concerns, the company’s track record of success makes it a compelling investment opportunity.

In conclusion, Churchill Downs remains a standout player in the gaming industry, leveraging its unique assets like the Kentucky Derby to drive future growth. With a history of value creation and a focus on strategic investments, the company offers investors a promising opportunity to benefit from its long-term growth trajectory at an attractive valuation.