Contrasting Microsoft (NASDAQ:MSFT) and Dolby Laboratories (NYSE:DLB)

Dolby Laboratories (NYSE:DLB) and Microsoft (NASDAQ:MSFT) are both technology companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, dividends, earnings, profitability, risk and valuation.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Dolby Laboratories	16.70%	11.08%	9.04%
Microsoft	40.31%	31.98%	18.70%

Dividends

Dolby Laboratories pays an annual dividend of $1.44 per share and has a dividend yield of 2.4%. Microsoft pays an annual dividend of $3.64 per share and has a dividend yield of 0.7%. Dolby Laboratories pays out 61.3% of its earnings in the form of a dividend. Microsoft pays out 20.3% 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. Dolby Laboratories has increased its dividend for 10 consecutive years and Microsoft has increased its dividend for 23 consecutive years.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dolby Laboratories	0	1	2	0	2.67
Microsoft	2	4	42	0	2.83

Dolby Laboratories currently has a consensus price target of $87.50, indicating a potential upside of 43.86%. Microsoft has a consensus price target of $589.71, indicating a potential upside of 9.32%. Given Dolby Laboratories’ higher probable upside, equities research analysts plainly believe Dolby Laboratories is more favorable than Microsoft.

Risk & Volatility

Dolby Laboratories has a beta of 0.78, suggesting that its stock price is 22% less volatile than the S&P 500. Comparatively, Microsoft has a beta of 1.1, suggesting that its stock price is 10% more volatile than the S&P 500.

Valuation & Earnings

This table compares Dolby Laboratories and Microsoft”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Dolby Laboratories	$1.35 billion	4.22	$255.02 million	$2.35	25.88
Microsoft	$331.84 billion	12.07	$133.75 billion	$17.96	30.04

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

Insider & Institutional Ownership

58.6% of Dolby Laboratories shares are owned by institutional investors. Comparatively, 71.1% of Microsoft shares are owned by institutional investors. 37.9% of Dolby Laboratories shares are owned by insiders. Comparatively, 0.0% of Microsoft shares are owned by 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

Microsoft beats Dolby Laboratories on 14 of the 17 factors compared between the two stocks.

About Dolby Laboratories

Dolby Laboratories, Inc. creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles. The company develops and licenses its audio technologies, such as AAC & HE-AAC, a digital audio codec solution used for a range of media applications; AVC, a digital video codec with high bandwidth efficiency used in various media devices; Dolby AC-4, a digital audio coding technology that delivers new audio experiences to a range of playback devices; and Dolby Atmos technology for cinema and various media devices. Its audio technologies also include DD, a digital audio coding technology that provides multichannel sound to applications; DD+, a digital audio coding technology that offers audio transmission for a range of media applications and devices; Dolby TrueHD, a digital audio coding technology providing encoding for media application; Dolby Vision, an imaging technology for cinema and media devices; and HEVC, a digital video codec with high bandwidth efficiency for media devices. In addition, the company offers digital cinema servers, cinema processors, amplifiers, loudspeakers, and audio and imaging hardware and software products for the cinema, television, broadcast, communication, and entertainment industries. Further, it provides 3-D glasses and kits; and various services to support theatrical and television production for cinema exhibition, broadcast, and home entertainment. The company serves film studios, content creators, post-production facilities, cinema operators, broadcasters, and video game designers. It sells its products directly to the end users, as well as through dealers and distributors worldwide. Dolby Laboratories, Inc. was founded in 1965 and is headquartered in San Francisco, California.

About Microsoft

Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services. This segment also provides LinkedIn; and dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automate; and on-premises ERP and CRM applications. The Intelligent Cloud segment offers server products and cloud services, such as azure and other cloud services; SQL and windows server, visual studio, system center, and related client access licenses, as well as nuance and GitHub; and enterprise services including enterprise support services, industry solutions, and nuance professional services. The More Personal Computing segment offers Windows, including windows OEM licensing and other non-volume licensing of the Windows operating system; Windows commercial comprising volume licensing of the Windows operating system, windows cloud services, and other Windows commercial offerings; patent licensing; and windows Internet of Things; and devices, such as surface, HoloLens, and PC accessories. Additionally, this segment provides gaming, which includes Xbox hardware and content, and first- and third-party content; Xbox game pass and other subscriptions, cloud gaming, advertising, third-party disc royalties, and other cloud services; and search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates. The company sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online, and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.