Dolby Laboratories (NYSE: DLB) and DTS (NASDAQ:DTSI) are both consumer discretionary companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, dividends, analyst recommendations, profitabiliy, earnings and valuation.

Dividends

Dolby Laboratories pays an annual dividend of $0.56 per share and has a dividend yield of 1.1%. DTS pays an annual dividend of $0.08 per share and has a dividend yield of 0.2%. Dolby Laboratories pays out 28.6% of its earnings in the form of a dividend. DTS pays out -19.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. DTS has increased its dividend for 2 consecutive years.

Risk and Volatility

Dolby Laboratories has a beta of 0.77, meaning that its share price is 23% less volatile than the S&P 500. Comparatively, DTS has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500.

Earnings & Valuation

This table compares Dolby Laboratories and DTS’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Dolby Laboratories $1.07 billion 5.04 $340.22 million $1.96 26.82
DTS N/A N/A N/A ($0.42) -101.09

Dolby Laboratories has higher revenue and earnings than DTS. DTS is trading at a lower price-to-earnings ratio than Dolby Laboratories, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Dolby Laboratories and DTS, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dolby Laboratories 0 2 2 0 2.50
DTS 0 5 0 0 2.00

Dolby Laboratories currently has a consensus target price of $52.83, suggesting a potential upside of 0.50%. DTS has a consensus target price of $37.88, suggesting a potential downside of 10.80%. Given Dolby Laboratories’ stronger consensus rating and higher possible upside, analysts plainly believe Dolby Laboratories is more favorable than DTS.

Profitability

This table compares Dolby Laboratories and DTS’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dolby Laboratories 19.02% 10.39% 8.90%
DTS 1.17% 1.04% 0.59%

Insider and Institutional Ownership

50.7% of Dolby Laboratories shares are held by institutional investors. Comparatively, 98.1% of DTS shares are held by institutional investors. 43.8% of Dolby Laboratories shares are held by company insiders. Comparatively, 11.3% of DTS shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Dolby Laboratories beats DTS on 10 of the 14 factors compared between the two stocks.

About Dolby Laboratories

Dolby Laboratories, Inc. designs and manufactures audio and imaging products for the cinema, television, broadcast and entertainment industries. Its products for cinema include Digital Cinema Servers and Cinema Audio Products, and broadcast and other include Dolby Conference Phone and Other Products. It offers services to support theatrical and television production for cinema exhibition, broadcast and home entertainment, including equipment training and maintenance, mixing room alignment and equalization, as well as audio, color and light image calibration. Its technologies include Advanced Audio Coding and High Efficiency Advanced Audio Coding, Dolby AC-4, Dolby Atmos, Dolby Digital, Dolby Digital Plus, Dolby TrueHD, Dolby Vision, Dolby Voice and High Efficiency Video Coding. It distributes its products in over 80 countries. Its technologies are incorporated in offerings in various end markets, such as the broadcast, Personal Computer, mobile, consumer electronics and other markets.

About DTS

DTS, Inc. is an audio technology solutions provider for high-definition entertainment experiences. The Company’s audio solutions are designed to enable recording, delivery and playback of high-definition audio, and are included by licensee customers around the world into a range of consumer electronics devices, including televisions, personal computers (PCs), smartphones, tablets, digital media players (DMPs), set-top-boxes, soundbars, wireless speakers, video game consoles, Blu-ray Disc players, automotive audio systems, audio/video receivers (AVRs), digital versatile disc (DVD)-based products and home theater systems. In the wireless speakers market, the Company maintains a Play-Fi Certified original design manufacturer (ODM) Program. The Company’s market base includes Blu-ray, Home audio video (AV) and Automotive. The Blu-ray market includes standalone players, gaming devices and disc drives included in PCs.

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