CS Disco, Inc. (NYSE:LAW) is a technology company that provides cloud-based software solutions for legal professionals. The company aims to streamline legal processes through its innovative platform, which offers features like e-discovery, case management, and legal document review. Despite its technological advancements, CS Disco faces competition from other tech firms in the legal and software sectors.
In analyzing CS Disco's financial performance, the focus is on its Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC). CS Disco has a negative ROIC of -39.56%, which is significantly lower than its WACC of 13.59%. This indicates that the company is not generating enough returns to cover its cost of capital, suggesting inefficiencies in capital utilization.
Comparing CS Disco to its peers, Couchbase, Inc. (BASE) also shows a negative ROIC of -59.87% against a WACC of 8.03%, resulting in a ROIC to WACC ratio of -7.46. This is even less favorable than CS Disco's ratio of -2.91, indicating greater inefficiency in capital use. On the other hand, VTEX (VTEX) has a positive ROIC of 4.39% and a WACC of 10.76%, leading to a ROIC to WACC ratio of 0.41, the highest among the peers.
EverCommerce Inc. (EVCM) and Cytek Biosciences, Inc. (CTKB) have ROICs of 2.37% and -5.02%, respectively, with WACCs of 11.28% and 11.49%. Their ROIC to WACC ratios are 0.21 and -0.44, showing varying levels of capital efficiency. Xometry, Inc. (XMTR) has a ROIC of -9.04% and a WACC of 6.74%, resulting in a ratio of -1.34, which is better than Couchbase but still negative.
Among these companies, VTEX stands out with the most favorable ROIC to WACC ratio, indicating it is the most efficient in capital utilization. While CS Disco and several peers struggle with negative ROICs, VTEX's positive ratio suggests it is closer to achieving a balance between returns and costs, making it a potentially more attractive investment.
