Editor's Note: 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. 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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow.
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- 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 3.60, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for DOLBY LABORATORIES INC is currently very high, coming in at 96.00%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.82% significantly outperformed against the industry average.
- DLB, with its decline in revenue, slightly underperformed the industry average of 0.6%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Electronic Equipment, Instruments & Components industry. The net income has significantly decreased by 29.7% when compared to the same quarter one year ago, falling from $88.12 million to $61.91 million.
- Net operating cash flow has significantly decreased to $55.82 million or 53.04% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff