CS Disco, Inc. (LAW) DCF Valuation & Fundamental Primer
CS Disco, Inc. (LAW) trades at $5.70 with a market enterprise value of $356.7M and generated $167.1M in TTM revenue and -$16.4M in free cash flow (filed 2026-08-05 (period ended 2026-06-30)). Our 5-year DCF model estimates an implied intrinsic value of -$4.24 per diluted share (Grade: C · 48/100 · Capital Intensive / Low Margin).
SEC 10-K/10-Q DCF teardown of CS Disco, Inc. (LAW): $167.1M TTM revenue (8.2% growth), 74.8% GAAP gross margin, -9.8% FCF margin, 13.5% SBC/revenue, and R&D Return Grade CC (Burners, $0.19 new gross profit per $1 prior R&D).
CS Disco, Inc. (LAW) earns a "Pass" rating and an institutional Quality Score of 48/100 (Grade C). On $167.1M in baseline revenue (8.2% growth, 74.8% gross margin, -9.8% FCF margin), our 5-year DCF yields an Enterprise Value of -$284.6M (-$4.24/share vs. $5.70 market price). On the R&D Return Benchmark, LAW ranks #138 of 174 (Burners · Grade CC, 0.19× return).
Gross Margin & Unit Economics: CS Disco, Inc. operates at a 74.8% gross margin on $167.1M revenue (+2.1 pts above the Software - Application median of 72.7%).
R&D Productivity (Burners · Grade CC): Investing 36.1% of revenue in R&D ($56.6M) generates $0.19 of incremental gross profit per R&D dollar (Rank #138 of 174).
Rule of 40 & Cash Conversion: Combining 8.2% top-line growth with -9.8% FCF margin yields a -1.6% Rule of 40 score (vs. 47.2% cohort median) and -$284.6M DCF Enterprise Value.
3-Statement Financial Schedule & 5-Year Horizon
Synchronized directly with the 3-Year Operating Statement (74.8% Gross Margin · 8.2% Growth)
| Income Statement Line | Year 1 (2026) | Year 2 (2027) | Year 3 (2028) |
|---|---|---|---|
| Revenue | $167.1M | $180.9M | $195.7M |
| Cost of Revenue (COGS) | ($42.1M) | ($44.6M) | ($47.3M) |
| Gross Profit & Margin | $125.0M (74.8%) | $136.2M (75.3%) | $148.4M (75.8%) |
| Research & Development (R&D) | $58.0M | $60.3M | $62.5M |
| Sales & Marketing (S&M) | $79.2M | $82.3M | $85.4M |
| General & Administrative (G&A) | $30.8M | $32.0M | $33.2M |
| Operating EBIT | -$43.0M (-25.7%) | -$38.4M (-21.2%) | -$32.7M (-16.7%) |
| Adjusted EBITDA | -$39.6M (-23.7%) | -$34.7M (-19.2%) | -$28.7M (-14.7%) |
3 Key Underwriting Risks
Structural sensitivities monitored in the 3-Statement Financial Engine
Value-Creation Levers · Quantified Statement Impact
Apply any lever below to write its operating assumptions directly into the 3-Statement Model
Automate cloud hosting & support workflows to lift gross margin from 74.8% to 79.8%.
Align R&D intensity and ASC 350-40 capitalization to the R&D Compounders cohort median, recapturing $21.9M in annual EBITDA.
Lift net dollar retention and expansion velocity by +300 bps, compounding Year 3 revenue to $206.7M.
CS Disco, Inc. (LAW) 3-Scenario DCF Valuation Range
Stress-test LAW's 5-year growth, target FCF margin, WACC, terminal methodology, and SBC/dilution friction in real time.
Simulate how deploying Gemini workflow automation and autonomous engineering expands LAW's Gross Margin, FCF Margin, DCF share price, and 2x2 R&D Return Quadrant.
Split between 5-Year Explicit Cash Flows and Discounted Terminal Value
2D Institutional Valuation Sensitivity Heatmap
Implied share price & upside/downside spread across 25 valuation states (Current Price: $5.70).
| WACC \ Terminal | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 8.5% | $5.16 -9% | $5.46 -4% | $5.82 +2% | $6.24 +9% | $6.74 +18% |
| 9.3% | $4.66 -18% | $4.90 -14% | $5.18 -9% | $5.50 -4% | $5.87 +3% |
| 10.0% | $4.25 -25% | $4.44 -22% | $4.66 -18% | $4.91 -14% | $5.20 -9% |
| 10.8% | $3.91 -31% | $4.07 -29% | $4.24 -26% | $4.44 -22% | $4.67 -18% |
| 11.5% | $3.62 -37% | $3.75 -34% | $3.89 -32% | $4.06 -29% | $4.24 -26% |
Institutional Software Quality Scorecard (48/100 · Grade C)
Weak cash conversion, substantial dilution drag, or constrained financial flexibility.
Negative free cash flow; business consumes cash to sustain operations
Standard software SBC dilution; modest equity transfer to employees
Solid gross margins with potential for operating leverage at scale
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
Key Operational & Dilution Risks
- Negative free cash flow burn of -$16.4M over trailing twelve months
Audited R&D Intensity is 36.1% of revenue with a 0.19× incremental gross profit return per R&D dollar. Under your current Stage 1 (8.2% CAGR / 74.8% GM) assumptions, LAW projects to 0.17× R&D Return (Grade C · Burners).
Reverse-DCF Solver: What Growth is Priced Into LAW?
Market implies 3.5% annual revenue growth over next 5 years (18.3% dilution-adjusted), in line with company run-rate.
Headline Reverse-DCF ignores Stock-Based Compensation (13.5% of revenue) and annual share dilution (0.0%/yr). Accounting for both requires 18.3% 5-year revenue CAGR to justify $5.70/sh on a true per-share economic cash flow basis.
CS Disco, Inc. (LAW) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $167.1M | $167.1M | $180.9M | $195.7M | $211.8M | $229.2M | $248.1M |
| Gross Profit | $125.0M | $125.1M | $135.3M | $146.5M | $158.5M | $171.5M | $185.6M |
| Operating Income (EBIT) | -$43.0M | -$43.0M | -$46.6M | -$50.4M | -$54.5M | -$59.0M | -$63.9M |
| Stock-Based Compensation (SBC) | $22.6M | $22.6M | $24.5M | $26.5M | $28.7M | $31.0M | $33.6M |
| Unlevered Free Cash Flow (FCF) | -$16.4M | -$16.4M | -$17.7M | -$19.2M | -$20.8M | -$22.5M | -$24.3M |
| SBC-Adjusted True Cash Flow | -$39.0M | -$39.0M | -$42.2M | -$45.7M | -$49.4M | -$53.5M | -$57.9M |
Software - Application Peer Comparables & Rule of 40 Regression
Rule of 40 vs. EV / Revenue Multiple Regression
OLS Fit: EV/Rev = 6.8 + 0.05 × (Rule of 40) · R² = 12%Stocks below the gold regression line trade at a discount relative to their Rule of 40 compounding efficiency.
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| CS Disco, Inc. | LAW | $367.6M | $167.1M | 74.8% | -9.8% | -1.6% | 13.5% | 2.1× |
| Grab Holdings Limited | GRAB | $20.18B | $2.80B | 42.0% | 27.7% | 84.0% | 10.0% | 6.3× |
| Figma, Inc. | FIG | $18.07B | $749.0M | 88.3% | -9.2% | 39.1% | 126.5% | 23.5× |
| Full Truck Alliance Co. Ltd. | YMM | $71.73B | $11.24B | 86.6% | 25.8% | 70.2% | 4.4% | 5.9× |
| ServiceTitan, Inc. | TTAN | $9.97B | $771.9M | 64.9% | 2.0% | 30.5% | 21.2% | 12.5× |
| InterDigital, Inc. | IDCC | $8.65B | $868.5M | 80.5% | 30.6% | 55.3% | 5.3% | 9.9× |
| OPEN TEXT CORP | OTEX | $8.11B | $5.30B | 63.5% | 13.0% | 23.8% | 2.0% | 2.6× |
| Peer Cohort Median Benchmark (N=6) | 72.7% | 19.4% | 47.2% | 7.6% | 8.1× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 2.1× | $356.7M | $367.6M | $5.70 | 0.0% |
| -20% Multiple Compression | 1.7× | $285.4M | $296.2M | $4.59 | -20.0% |
| -35% Multiple Compression | 1.4× | $231.9M | $242.7M | $3.76 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $835.6M | $846.5M | $13.13 | +134.3% |
Frequently Asked Questions: CS Disco, Inc. (LAW) Valuation
What is CS Disco, Inc. (LAW)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, CS Disco, Inc. (LAW) has a Base Case implied value of -$4.24 per share (with a Bear Case of -$2.23 and a Bull Case of -$6.59), compared to its current price of $5.70. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is CS Disco, Inc. (LAW)'s Rule of 40 score and Free Cash Flow margin?
CS Disco, Inc. achieves a Rule of 40 score of -1.6%, combining a 8.2% revenue growth run-rate with a -9.8% TTM free cash flow margin on $167.1M in trailing twelve-month revenue. In the Software - Application peer cohort, the median Rule of 40 benchmark is 47.2%.
What revenue growth rate is priced into LAW stock according to Reverse-DCF analysis?
At $5.70 per share (Enterprise Value of $356.7M), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of 3.5%, compared to CS Disco, Inc.'s historical CAGR of 8.2%. Overall market expectations are rated as "Fairly Priced to Fundamentals".
What is CS Disco, Inc. (LAW)'s R&D Return Score and innovation productivity?
On the Golden Door Software R&D Return Benchmark, CS Disco, Inc. (LAW) is ranked #138 out of 174 scored software peers, earning a Grade CC in the "Burners" quadrant. CS Disco, Inc. invests 36.1% of FY revenue into R&D ($56.6M) and generated $0.19 of incremental gross profit per prior-year R&D dollar.
How does CS Disco, Inc. compare to Software - Application peers?
CS Disco, Inc. (LAW) earns an institutional Software Quality Score of 48/100 (Grade C — Capital Intensive / Low Margin). Across its Software - Application peer group (GRAB, FIG, YMM, TTAN, IDCC), the cohort trades at a median EV/TTM Revenue multiple of 8.1× and a median gross margin of 72.7%.
How does Stock-Based Compensation (SBC) impact CS Disco, Inc. (LAW)'s valuation?
CS Disco, Inc. recorded $22.6M in TTM stock-based compensation (13.5% of revenue). When treating SBC as a cash-equivalent compensation expense, CS Disco, Inc.'s SBC-adjusted free cash flow yield is -10.6%, scoring 16/25 on our Shareholder Dilution Friction pillar.