Churchill Downs Corporate Bonds and Leverage Analysis
| CHDN Stock | USD 114.70 0.42 0.37% |
Churchill Downs has over 839.8 Million in debt which may indicate that it relies heavily on debt financing. At this time, Churchill Downs' Cash Flow To Debt Ratio is very stable compared to the past year. With a high degree of financial leverage come high-interest payments, which usually reduce Churchill Downs' Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Churchill Downs' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Churchill Downs' cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Churchill Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Churchill Downs' stakeholders.
For most companies, including Churchill Downs, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Churchill Downs Incorporated, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Churchill Downs' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
At this time, Churchill Downs' Liabilities And Stockholders Equity is very stable compared to the past year. As of the 27th of February 2025, Non Current Liabilities Total is likely to grow to about 878 M, while Total Current Liabilities is likely to drop about 85.4 M. Churchill |
Given the importance of Churchill Downs' capital structure, the first step in the capital decision process is for the management of Churchill Downs to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Churchill Downs Incorporated to issue bonds at a reasonable cost.
Churchill Downs Debt to Cash Allocation
As Churchill Downs Incorporated follows its natural business cycle, the capital allocation decisions will not magically go away. Churchill Downs' decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors.
Churchill Downs Incorporated currently holds 839.8 M in liabilities with Debt to Equity (D/E) ratio of 5.26, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Churchill Downs has a current ratio of 3.6, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Churchill Downs' use of debt, we should always consider it together with its cash and equity.Churchill Downs Total Assets Over Time
Churchill Downs Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Churchill Downs uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.Churchill Downs Debt Ratio | 11.0 |
Churchill Downs Corporate Bonds Issued
Churchill Downs issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Churchill Downs uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt.
Churchill Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Churchill Downs Use of Financial Leverage
Leverage ratios show Churchill Downs' total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Churchill Downs' financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 839.8 M | 760.1 M | |
| Net Debt | 839.8 M | 709.1 M | |
| Short Term Debt | 8.7 M | 8.3 M | |
| Long Term Debt | 4.8 B | 5.1 B | |
| Long Term Debt Total | 2.8 B | 3 B | |
| Short and Long Term Debt | 63.1 M | 66.3 M | |
| Net Debt To EBITDA | 0.62 | 0.59 | |
| Debt To Equity | 0.78 | 1.09 | |
| Interest Debt Per Share | 15.26 | 16.03 | |
| Debt To Assets | 0.12 | 0.11 | |
| Long Term Debt To Capitalization | 0.44 | 0.31 | |
| Total Debt To Capitalization | 0.44 | 0.31 | |
| Debt Equity Ratio | 0.78 | 1.09 | |
| Debt Ratio | 0.12 | 0.11 | |
| Cash Flow To Debt Ratio | 0.92 | 1.47 |
Check out the analysis of Churchill Downs Fundamentals Over Time. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Is Hotels, Restaurants & Leisure space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Churchill Downs. If investors know Churchill will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Churchill Downs listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 0.294 | Dividend Share 0.409 | Earnings Share 5.68 | Revenue Per Share | Quarterly Revenue Growth 0.112 |
The market value of Churchill Downs is measured differently than its book value, which is the value of Churchill that is recorded on the company's balance sheet. Investors also form their own opinion of Churchill Downs' value that differs from its market value or its book value, called intrinsic value, which is Churchill Downs' true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Churchill Downs' market value can be influenced by many factors that don't directly affect Churchill Downs' underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Churchill Downs' value and its price as these two are different measures arrived at by different means. Investors typically determine if Churchill Downs is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Churchill Downs' price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
What is Financial Leverage?
Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.Leverage and Capital Costs
The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.Benefits of Financial Leverage
Leverage provides the following benefits for companies:- Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
- It provides a variety of financing sources by which the firm can achieve its target earnings.
- Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.