Based in San Francisco, Dolby Laboratories (DLB) is a world leader in audio entertainment, notes growth stock expert Mark Skousen, editor of Five-Star Trader.

Founder Ray Dolby first developed noise reduction systems to improve recorded sound quality. Today, the name Dolby is synonymous with quality audio throughout the world.

Virtually every time you see a movie, watch a YouTube short, or slip a CD into your player, you contribute to Dolby’s revenue stream. And it is a diverse one…

Dolby equips movie theaters so that audiences are enveloped in a multi-speaker surround-sound experience. Dolby technology is mandated in every DVD and Blu-ray disc player sold in the United States.

Its sound is also embedded in most flat-screen TVs and set-top boxes sold in the United States and Europe. Microsoft even licensed Dolby technology for its Windows operating system.

Last week, Dolby announced financial results for the June quarter. Earnings per share (EPS) soared several-fold on a 41% increase in revenue.

Other metrics also look good. Dolby enjoys a 25% profit margin. Management is earning a healthy 14% return on equity. The company also has no debt and is sitting on more than $837 million in cash.

Dolby further just increased its stock repurchase program by $350 million, bringing the total to $415 million. I estimate that its EPS will rise from $2.54 this year to nearly $3 in 2020. That makes the stock a bargain at current levels.

So, pick up Dolby Laboratories at market today. And place a sell stop at $46 for protection. If you prefer to play this one more aggressively, try the DLB December $65 calls, which last traded at $1.50 and expire Dec. 20.

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