CS Disco Faces Headwinds On Slow Growth And High Operating Losses (Downgrade)

(10min)

Summary

  • CS Disco, Inc.'s revenue growth remains anemic, with heavy operating losses and high SG&A and R&D expenses, despite a growing legal software market.
  • The company is growing revenue in low single digits versus expected industry mid-teens CAGR, and has a poor net dollar retention rate.
  • Valuation is deeply discounted (0.9x EV/Sales) due to weak growth, negative margins, and ongoing uncertainties in the legal industry and global markets.
  • With no clear upside catalysts and persistent losses, my outlook is a bearish Sell on LAW stock; investor capital is better deployed elsewhere.
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Investment Outlook

CS Disco, Inc. (NYSE:LAW) recently reported its Q1 2025 financial results, beating revenue estimates and matching EPS expectations.

I previously analyzed LAW in August 2022 with a Hold outlook due to growing headcount

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This article was written by

21.05K Followers

Donovan Jones is a research specialist with 15 years of experience identifying opportunities for IPOs and public software companies.

He also leads the investing group IPO Edge, which offers actionable information on growth stocks through first-look IPO filings, previews on upcoming IPOs, an IPO calendar for tracking what’s on the horizon, a database of U.S. IPOs, and a guide to IPO investing to walk you through the entire IPO lifecycle - from filing to listing to quiet period and lockup expiration dates.

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Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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