Critical Comparison: Palo Alto Networks (NASDAQ:PANW) versus Dolby Laboratories (NYSE:DLB)

Palo Alto Networks (NASDAQ:PANW) and Dolby Laboratories (NYSE:DLB) are both technology companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Volatility & Risk

Palo Alto Networks has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500. Comparatively, Dolby Laboratories has a beta of 0.78, suggesting that its stock price is 22% less volatile than the S&P 500.

Institutional & Insider Ownership

79.8% of Palo Alto Networks shares are held by institutional investors. Comparatively, 58.6% of Dolby Laboratories shares are held by institutional investors. 1.4% of Palo Alto Networks shares are held by company insiders. Comparatively, 37.9% of Dolby Laboratories shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Palo Alto Networks and Dolby Laboratories, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palo Alto Networks	0	12	38	0	2.76
Dolby Laboratories	0	1	2	0	2.67

Palo Alto Networks currently has a consensus target price of $392.38, suggesting a potential upside of 4.62%. Dolby Laboratories has a consensus target price of $87.50, suggesting a potential upside of 48.95%. Given Dolby Laboratories’ higher possible upside, analysts clearly believe Dolby Laboratories is more favorable than Palo Alto Networks.

Earnings and Valuation

This table compares Palo Alto Networks and Dolby Laboratories”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palo Alto Networks	$11.48 billion	26.72	$307.00 million	$0.51	735.37
Dolby Laboratories	$1.35 billion	4.08	$255.02 million	$2.35	25.00

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

Profitability

This table compares Palo Alto Networks and Dolby Laboratories’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Palo Alto Networks	2.67%	8.50%	4.35%
Dolby Laboratories	16.70%	11.08%	9.04%

Summary

Palo Alto Networks beats Dolby Laboratories on 8 of the 14 factors compared between the two stocks.

About Palo Alto Networks

Palo Alto Networks, Inc. provides cybersecurity solutions worldwide. The company offers firewall appliances and software; and Panorama, a security management solution for the global control of network security platform as a virtual or a physical appliance. It also provides subscription services covering the areas of threat prevention, malware and persistent threat, URL filtering, laptop and mobile device protection, DNS security, Internet of Things security, SaaS security API, and SaaS security inline, as well as threat intelligence, and data loss prevention. In addition, the company offers cloud security, secure access, security operations, and threat intelligence and security consulting; professional services, including architecture design and planning, implementation, configuration, and firewall migration; education services, such as certifications, as well as online and in-classroom training; and support services. It sells its products and services through its channel partners, as well as directly to medium to large enterprises, service providers, and government entities operating in various industries, including education, energy, financial services, government entities, healthcare, Internet and media, manufacturing, public sector, and telecommunications. Palo Alto Networks, Inc. was incorporated in 2005 and is headquartered in Santa Clara, California.

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.