CS Disco, Inc. (NYSE: LAW)

Sector: Technology Industry: Software - Application CIK: 0001625641
Market Cap 446.23 Mn
P/B 3.42
P/E -7.31
P/S 2.92
ROIC (Qtr) -46.20
Div Yield % 0.00
Rev 1y % (Qtr) 12.83
Total Debt (Qtr) 7.60 Mn
Debt/Equity (Qtr) 0.06

About

CS Disco, Inc., or DISCO, operates in the legal technology industry, providing cloud-native and artificial intelligence-powered solutions to simplify legal hold, legal request, ediscovery, legal document review, and case management for various clients. Its stock symbol is LAW. The legal technology industry has witnessed significant growth due to the increasing complexity of legal matters and the need for efficient and cost-effective solutions. As a key player in this industry, DISCO focuses on developing and marketing product offerings that automate...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 28.80M provide 11.03x coverage of short-term debt 2.61M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 168.61M provides 22.18x coverage of total debt 7.60M, indicating robust asset backing and low credit risk.
  • Tangible assets of 168.61M provide exceptional 39.47x coverage of deferred revenue 4.27M, showing strong service capability backing.
  • Operating cash flow of (13.61M) fully covers other non-current liabilities (4.12M) by 3.30x, showing strong long-term stability.
  • Short-term investments of 84.68M provide solid 2.57x coverage of other current liabilities 32.92M, indicating strong liquidity.

Bear case

  • Operating cash flow of (13.61M) barely covers its investment activities of (34.21M), with a coverage ratio of 0.40, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (34.21M) provide weak support for R&D spending of 55.43M, which is -0.62x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of (13.61M) provides insufficient coverage of deferred revenue obligations of 4.27M, which is -3.19x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of (13.61M) shows concerning coverage of stock compensation expenses of 23.84M, with a -0.57 ratio indicating potential earnings quality issues.
  • Operating cash flow of (13.61M) provides minimal -26.69x coverage of tax expenses of 510000, suggesting potential tax planning inefficiencies or unsustainable tax positions.

Geographical Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 288.31 Bn 34.60 6.72 10.73 Bn
2 CRM Salesforce, Inc. 248.32 Bn 34.38 6.16 11.14 Bn
3 SHOP Shopify Inc. 212.27 Bn 119.19 19.85 1.12 Bn
4 INTU Intuit Inc. 180.73 Bn 43.89 9.30 6.78 Bn
5 UBER Uber Technologies, Inc 178.38 Bn 10.72 3.60 12.19 Bn
6 NOW ServiceNow, Inc. 146.98 Bn 84.91 11.60 2.40 Bn
7 ADBE Adobe Inc. 144.48 Bn 20.77 6.23 6.64 Bn
8 ADP Automatic Data Processing Inc 108.20 Bn 26.16 5.18 9.77 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.48 2.65
EV to Cash from Ops. EV/CFO -31.80 13.37
EV to Debt EV to Debt 56.92 57.69
EV to EBIT EV/EBIT -7.21 19.12
EV to EBITDA EV/EBITDA -7.31 15.00
EV to Free Cash Flow [EV/FCF] EV/FCF -25.90 14.69
EV to Market Cap EV to Market Cap 0.97 -92.28
EV to Revenue EV/Rev 2.83 4.60
Price to Book Value [P/B] P/B 3.42 4.26
Price to Earnings [P/E] P/E -7.31 -136.90
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 -3.95
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 4.25
Dividend per Basic Share Div per Share (Qtr) 0.00 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.52
Interest Coverage Int. cover (Qtr) -117.51 -52.32
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 11.24 -259.78
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -62.37 9,763.58
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 1.61
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -65.92 -263.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -59.00 56.46
EBIT Growth (1y) % EBIT 1y % (Qtr) -67.25 -225.15
EBT Growth (1y) % EBT 1y % (Qtr) -69.05 -86.10
EPS Growth (1y) % EPS 1y % (Qtr) -71.19 123.84
FCF Growth (1y) % FCF 1y % (Qtr) -49.83 -36.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 6.48 95.08
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.87 0.58
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.74 3.75
Current Ratio Curr Ratio (Qtr) 3.93 8.16
Debt to Equity Ratio Debt/Equity (Qtr) 0.06 0.17
Interest Cover Ratio Int Coverage (Qtr) -117.51 -52.32
Times Interest Earned Times Interest Earned (Qtr) -117.51 -52.32
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) -35.50 -100.06
EBIT Margin % EBIT Margin % (Qtr) -39.33 -164.24
EBT Margin % EBT Margin % (Qtr) -39.67 -116.94
Gross Margin % Gross Margin % (Qtr) 74.60 58.20
Net Profit Margin % Net Margin % (Qtr) -40.00 -121.65