Dolby Laboratories Inc. Stock Downgraded (DLB)

NEW YORK ( TheStreet) -- Dolby Laboratories (NYSE: DLB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and increase in net income. However, as a counter to these strengths, we find that the stock has had a generally disappointing performance in the past year.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.2%. Since the same quarter one year prior, revenues slightly increased by 4.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • DLB has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.74, which clearly demonstrates the ability to cover short-term cash needs.
  • DOLBY LABORATORIES INC has improved earnings per share by 12.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DOLBY LABORATORIES INC increased its bottom line by earning $2.74 versus $2.45 in the prior year. For the next year, the market is expecting a contraction of 5.8% in earnings ($2.58 versus $2.74).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Electronic Equipment, Instruments & Components industry and the overall market, DOLBY LABORATORIES INC's return on equity exceeds that of both the industry average and the S&P 500.
  • DLB has underperformed the S&P 500 Index, declining 17.62% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

Dolby Laboratories, Inc. provides products, services, and technologies for the entertainment industry worldwide. The company has a P/E ratio of 16.7, above the average electronics industry P/E ratio of 12.8 and below the S&P 500 P/E ratio of 17.7. Dolby has a market cap of $1.75 billion and is part of the technology sector and electronics industry. Shares are up 14.4% year to date as of the close of trading on Tuesday.

You can view the full Dolby Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

null

More from Markets

Trade Tussle Sinks Stocks, Oil Slides, Micron, Daimler - 5 Things You Must Know

Trade Tussle Sinks Stocks, Oil Slides, Micron, Daimler - 5 Things You Must Know

Bank of England Holds Rates Steady, But Vote Shift Signals Hawkish Tone

Bank of England Holds Rates Steady, But Vote Shift Signals Hawkish Tone

Futures Fall on Further Trade Rhetoric from China and 4 Other Stories to Watch

Futures Fall on Further Trade Rhetoric from China and 4 Other Stories to Watch

5 Biggest U.S. Tech Stocks Test $4 Trillion Valuation Amid Bullish Nasdaq Run

5 Biggest U.S. Tech Stocks Test $4 Trillion Valuation Amid Bullish Nasdaq Run

Trade War Fear Creeps Back Into Markets on Thursday

Trade War Fear Creeps Back Into Markets on Thursday