Value
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.3 |
| P/S | 7.9 |
| EV/EBITDA | 4.6 |
| Fwd P/E | 9.1 |
| PEG | 4.4 |
| Analyst target | 9.0 |
- ▸Forward P/E: 11.3x
- ▸PEG: 2.14
- ▸Attractively valued
DLB · Why this verdict
Why Dolby Laboratories (DLB) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
A perfect four-quarter earnings beat run with an average surprise of nearly 15%, strong 18% margins, and a high Piotroski score underpin a high-quality franchise that currently trades roughly 25% below the analyst consensus target — offering a risk/reward of approximately 4.6-to-1 in the buyer's favor — but a death cross is in place, the stock is in a confirmed downtrend with RSI near oversold, and 93% licensing concentration adds structural risk; timing is the primary near-term obstacle to expressing this value.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Strong margins of 18%, a Piotroski financial-health score of 8 out of 9, and solid free cash flow conversion collectively describe a financially sound business with above-average earnings quality. Quality breakdown | Operating margin remains above 15% and the Piotroski score stays at 7 or higher for at least two consecutive reporting periods, confirming the quality profile is stable. | →Stable |
| CounterThe two concentration risks flagged in the risk profile — near-total dependence on licensing revenue and sole-source suppliers — could impair margins quickly if either concentration point is disrupted, and quality metrics would lag the underlying deterioration. | ||
Every quarter over the past year has delivered an earnings beat, with an average positive surprise of nearly 15%, indicating a management team that consistently under-promises and over-delivers against consensus expectations. Earnings | EPS beats consensus in the next reported quarter, extending the streak to five consecutive beats and confirming execution discipline is structural rather than cyclical. | →Stable |
| CounterA perfect beat streak can reflect conservative guidance being mechanically cleared rather than genuine operational outperformance; if guidance discipline weakens or estimates are re-calibrated higher, the streak ends and the premium embedded in the valuation compresses. | ||
With roughly 25% of upside to the analyst consensus target against a downside buffer of approximately 5%, the risk/reward is approximately 4.6-to-1 in favor of the buyer — a geometry that the asymmetry threshold has cleared. Price targets | The stock recovers at least 15% toward the analyst target over the next 12 months as the technical pressure from the current downtrend eases. | →Stable |
| CounterA favorable risk/reward can persist without catalyzing a re-rating if the technical downtrend remains entrenched; the death cross pattern may attract systematic sellers, and a rich multiple can persist without a near-term catalyst to close the gap to target. | ||
The stock is in a confirmed downtrend — trading below its 200-day moving average with that average declining at -4.0% per month — and a death cross pattern is in place as a hard technical block, while RSI has fallen near oversold territory, signaling capitulation risk. Momentum breakdown | The death cross resolves, the 200-day moving average slope turns flat or positive, and the stock closes above the average for 20 consecutive trading days. | →Stable |
| CounterAn RSI near 29 and a sharp pullback can mark a capitulation low from which mean-reversion rallies are historically sharp; the technical damage may already be fully priced into the current discount to the analyst target. | ||
With approximately 93% of revenue derived from licensing and dependence on sole-source suppliers, the business carries two compounding concentration risks that could disrupt the revenue model if either the licensing channel or the supply base is disrupted. Bear case | Revenue from non-licensing sources grows to represent more than 10% of total revenue within 12 months, indicating early-stage diversification. | →Stable |
| CounterA highly concentrated licensing model with recurring royalty streams can be among the most durable and capital-light revenue structures available; the concentration is a feature of the business model rather than an oversight, and structural diversification is neither necessary nor likely. | ||
Strong margins of 18%, a Piotroski financial-health score of 8 out of 9, and solid free cash flow conversion collectively describe a financially sound business with above-average earnings quality.
→StableQuality breakdown
- Expectation
- Operating margin remains above 15% and the Piotroski score stays at 7 or higher for at least two consecutive reporting periods, confirming the quality profile is stable.
CounterThe two concentration risks flagged in the risk profile — near-total dependence on licensing revenue and sole-source suppliers — could impair margins quickly if either concentration point is disrupted, and quality metrics would lag the underlying deterioration.
Every quarter over the past year has delivered an earnings beat, with an average positive surprise of nearly 15%, indicating a management team that consistently under-promises and over-delivers against consensus expectations.
→StableEarnings
- Expectation
- EPS beats consensus in the next reported quarter, extending the streak to five consecutive beats and confirming execution discipline is structural rather than cyclical.
CounterA perfect beat streak can reflect conservative guidance being mechanically cleared rather than genuine operational outperformance; if guidance discipline weakens or estimates are re-calibrated higher, the streak ends and the premium embedded in the valuation compresses.
With roughly 25% of upside to the analyst consensus target against a downside buffer of approximately 5%, the risk/reward is approximately 4.6-to-1 in favor of the buyer — a geometry that the asymmetry threshold has cleared.
→StablePrice targets
- Expectation
- The stock recovers at least 15% toward the analyst target over the next 12 months as the technical pressure from the current downtrend eases.
CounterA favorable risk/reward can persist without catalyzing a re-rating if the technical downtrend remains entrenched; the death cross pattern may attract systematic sellers, and a rich multiple can persist without a near-term catalyst to close the gap to target.
The stock is in a confirmed downtrend — trading below its 200-day moving average with that average declining at -4.0% per month — and a death cross pattern is in place as a hard technical block, while RSI has fallen near oversold territory, signaling capitulation risk.
→StableMomentum breakdown
- Expectation
- The death cross resolves, the 200-day moving average slope turns flat or positive, and the stock closes above the average for 20 consecutive trading days.
CounterAn RSI near 29 and a sharp pullback can mark a capitulation low from which mean-reversion rallies are historically sharp; the technical damage may already be fully priced into the current discount to the analyst target.
With approximately 93% of revenue derived from licensing and dependence on sole-source suppliers, the business carries two compounding concentration risks that could disrupt the revenue model if either the licensing channel or the supply base is disrupted.
→StableBear case
- Expectation
- Revenue from non-licensing sources grows to represent more than 10% of total revenue within 12 months, indicating early-stage diversification.
CounterA highly concentrated licensing model with recurring royalty streams can be among the most durable and capital-light revenue structures available; the concentration is a feature of the business model rather than an oversight, and structural diversification is neither necessary nor likely.
Per-dimension breakdown
Quality
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.1 |
| ROA | 3.5 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 8.9 |
| Current ratio | 9.9 |
| FCF quality | 7.9 |
| Moat | 5.8 |
| Rule of 40 | 5.5 |
| Piotroski F | 8.9 |
- ▸Strong margins: 18%
- ▸Strong Piotroski F-Score: 8/9
Growth
3.7/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.3 |
| EPS growth | 3.1 |
Momentum
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.5 |
| MACD | 7.4 |
| OBV | 10.0 |
| MA position | 1.0 |
| Volume | 4.9 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -4.1%/30d — confirmed downtrend
Sentiment
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.1 |
| Price target | 9.5 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (3.0) — signal dampened
- ▸Analyst upside: 49%
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Modest insider selling — $2,291,774 (0.046% of mkt cap)
Peer rank
4.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.9 |
| quality rank | 6.6 |
| growth rank | 3.8 |
Technical
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.9 |
| support resistance | 7.3 |
| 52w position | 4.0 |
Risk (lower is worse)
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 4.5 |
| days to cover | 5.2 |
| volatility | 5.6 |
| put call | 0.0 |
| implied vol | 7.5 |
| beta | 8.2 |
| debt equity | 3.2 |
- ▸Elevated put/call: 9.67
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 9.9 |
| dividend safety | 6.5 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 271.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (8)
- MOMENTUM:5.4>=4.5
- ASYMMETRY:4.8>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:42d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (0)
none
Warning (2)
- MOMENTUM:5.4<5.5 (soft — BUY_NOW allowed but watch)
- DEATH_CROSS:momentum=5.4>=5.0 recovering
Reward-to-Risk
4.83
Upside
+26.5%
Downside
5.5%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — MCap $4.9B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 7.3) was not enough to lift the adjusted overall above the threshold. Current asymmetry R:R is 4.83 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 7.3, Catalyst at 7.3, and Value at 7.0; the weakest are Growth at 3.7, Insider at 3.9, and Peer rank at 4.7. The V9 engine cleared all gates with 2 warnings, producing an asymmetric reward-to-risk of 4.83 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Every quarter over the past year has delivered an earnings beat, with an average positive surprise of nearly 15%, indicating a management team that consistently under-promises and over-delivers against consensus expectations.
Trip ifEPS surprise falls below 0% in the next reported quarter, breaking the four-quarter beat streak.
- P2With roughly 25% of upside to the analyst consensus target against a downside buffer of approximately 5%, the risk/reward is approximately 4.6-to-1 in favor of the buyer — a geometry that the asymmetry threshold has cleared.
Trip ifUpside to the analyst consensus target compresses below 10% as the stock rallies or consensus estimates are cut.
- P3Strong margins of 18%, a Piotroski financial-health score of 8 out of 9, and solid free cash flow conversion collectively describe a financially sound business with above-average earnings quality.
Trip ifOperating margin compresses below 12% for 2 consecutive quarters.
- P4The stock is in a confirmed downtrend — trading below its 200-day moving average with that average declining at -4.0% per month — and a death cross pattern is in place as a hard technical block, while RSI has fallen near oversold territory, signaling capitulation risk.
Trip ifDeath cross resolves and price closes above the 200-day moving average for 20 consecutive trading days.
- P5With approximately 93% of revenue derived from licensing and dependence on sole-source suppliers, the business carries two compounding concentration risks that could disrupt the revenue model if either the licensing channel or the supply base is disrupted.
Trip ifLicensing revenue falls below 80% of total revenue for 2 consecutive reporting periods, indicating active diversification.