It's been a good week for Dolby Laboratories, Inc. (NYSE:DLB) shareholders, because the company has just released its latest annual results, and the shares gained 5.6% to US$69.36. Revenues of US$1.2b were in line with forecasts, although earnings per share (EPS) came in below expectations at US$2.44, missing estimates by 2.3%. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
After the latest results, the five analysts covering Dolby Laboratories are now predicting revenues of US$1.33b in 2020. If met, this would reflect a reasonable 7.4% improvement in sales compared to the last 12 months. Earnings per share are expected to rise 8.5% to US$2.73. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.35b and earnings per share (EPS) of US$2.87 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a minor downgrade to their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$73.40, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Dolby Laboratories at US$85.00 per share, while the most bearish prices it at US$66.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Further, we can compare these estimates to past performance, and see how Dolby Laboratories forecasts compare to the wider market's forecast performance. It's clear from the latest estimates that Dolby Laboratories's rate of growth is expected to accelerate meaningfully, with forecast 7.4% revenue growth noticeably faster than its historical growth of 5.8%p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect Dolby Laboratories to grow faster than the wider market.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that Dolby Laboratories's revenues are expected to grow faster than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Dolby Laboratories analysts - going out to 2022, and you can see them free on our platform here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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