DTS Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of DTS (NAS: DTSI) fell nearly 30% in early trading but recovered more than half of that loss to close down 14.4% for the day. Investors didn't like that second-quarter results came in below expectations.

So what: Revenue rose 18% to $20.6 million, resulting in an adjusted profit of $0.24 a share. Analysts had been calling for $21.8 million and $0.25 a share, respectively.

Now what: Guidance may have spooked investors most. Management now expects the company, whose audio-encoding technology competes with similar tech from Dolby (NYS: DLB) , to book $1.30 to $1.42 in full-year profit on $95 million to $100 million in revenue. Wall Street had expected the company to end 2011 with a $1.48 a share profit on $103.9 million in revenue. Do the size of these misses justify the selloff? You tell me. Weigh in using the comments box below.

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At the time thisarticle was published Fool contributorTim Beyersis a member of theMotley Fool Rule Breakersstock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdingsandFoolish writings, or connect with him onGoogle+or Twitter, where he goes by@milehighfool. You can also get his insightsdelivered directly to your RSS reader.Motley Fool newsletter serviceshave recommended buying shares of Dolby Laboratories. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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