Dolby Laboratories, Inc. (NYSE:DLB), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Dolby Laboratories’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Dolby Laboratories still cheap?
According to my valuation model, the stock is currently overvalued by about 21%, trading at US$69.60 compared to my intrinsic value of $57.65. This means that the buying opportunity has probably disappeared for now. Furthermore, Dolby Laboratories’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Dolby Laboratories?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 14% over the next couple of years, the outlook is positive 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? It seems like the market has well and truly priced in DLB’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DLB should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on DLB for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for DLB, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
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.
This article by Simply Wall St is general in nature. 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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