Is There Now An Opportunity In Dolby Laboratories, Inc. (NYSE:DLB)?
While Dolby Laboratories, Inc. (NYSE:DLB) might not be the most widely known stock at the moment, it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of US$80.93 to US$85.91. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Dolby Laboratories’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Dolby Laboratories
What's The Opportunity In Dolby Laboratories?
Great news for investors – Dolby Laboratories is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Dolby Laboratories’s ratio of 33.61x is below its peer average of 47.17x, which indicates the stock is trading at a lower price compared to the Software industry. Another thing to keep in mind is that Dolby Laboratories’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of Dolby Laboratories look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 23% over the next couple of years, the future seems bright for Dolby Laboratories. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since DLB is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on DLB for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DLB. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
It can be quite valuable to consider what analysts expect for Dolby Laboratories from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.
If you are no longer interested in Dolby Laboratories, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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