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Dolby Laboratories, Inc. (DLB) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Dolby Laboratories, Inc. (DLB)

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Intrinsic Value (DCF)

Current$63.36
→
Intrinsic$91.62
+45%
$64.80$91.62$142.60
Market implies 1% growth for 5 years
DCF analysis suggests DLB could have 45% upside at 9% growth — verify assumptions match your view.
At $63, the market prices in only 1% growth — below historical 9%, suggesting low expectations.
Range: Bear $65 → Bull $143. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →5%7%9%11%
8%$108$117$127$137
10%$79$85$92$99
12%$62$67$72$78
14%$52$56$60$64

Bull Case

  • Bull case ($143) offers 125% upside at 11% growth, 9% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (1%) ≤ historical CAGR (9%)

Bear Case

  • Bear case ($65) with 8% growth, 12% discount rate
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5-Year Free Cash Flow Projection

Year 1$470.60M
Year 2$514.72M
Year 3$562.98M
Year 4$615.77M
Year 5$673.51M
Terminal$9.91B

📐 Model Inputs

Growth Rate9.4%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$430.26MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is DLB stock undervalued or overvalued?
🟢 UNDERVALUED

DLB trades at $63.36 vs. our DCF-derived intrinsic value of $91.62, implying +42% upside. At a 10.0% WACC and 9.4% projected FCF growth, the market appears to be underpricing the present value of DLB's future cash flows. The bear case ($67.50) still suggests upside, providing margin of safety.

What is DLB's intrinsic value?

Using a 5-year DCF model: Base FCF of $430M, projected at 9.4% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-663M net debt and dividing by 0.10B shares: Bear $67.50 | Base $91.62 | Bull $124.29. Current price $63.36 implies +42% to base case.

How is DLB's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 9.4% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($8.27B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 19.2x.