Dolby Laboratories, Inc. (NYSE:DLB), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$89.38 and falling to the lows of US$78.28. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Dolby Laboratories' current trading price of US$85.72 reflective of the actual value 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.

Check out our latest analysis for Dolby Laboratories

What Is Dolby Laboratories Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 40.61x is currently trading slightly below its industry peers' ratio of 47.35x, which means if you buy Dolby Laboratories today, you'd be paying a reasonable price for it. And if you believe Dolby Laboratories should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Dolby Laboratories's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Dolby Laboratories generate?

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. Dolby Laboratories' earnings over the next few years are expected to increase by 57%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? DLB's optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at DLB? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you've been keeping an eye on DLB, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for DLB, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Diving deeper into the forecasts for Dolby Laboratories mentioned earlier will help you understand how analysts view the stock going forward. 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.