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.
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- 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.
-- Written by a member of TheStreet Ratings Staff