CS Disco (NYSE:LAW) and DigitalOcean (NYSE:DOCN) Critical Analysis

CS Disco (NYSE:LAW) and DigitalOcean (NYSE:DOCN) are both computer and technology companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, valuation, earnings and dividends.

Volatility & Risk

CS Disco has a beta of 2.15, suggesting that its stock price is 115% more volatile than the S&P 500. Comparatively, DigitalOcean has a beta of 1.76, suggesting that its stock price is 76% more volatile than the S&P 500.

Valuation and Earnings

This table compares CS Disco and DigitalOcean”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CS Disco	$156.85 million	1.63	-$44.37 million	($0.72)	-5.62
DigitalOcean	$901.43 million	8.73	$259.26 million	$2.53	33.80

DigitalOcean has higher revenue and earnings than CS Disco. CS Disco is trading at a lower price-to-earnings ratio than DigitalOcean, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares CS Disco and DigitalOcean’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CS Disco	-28.29%	-26.13%	-20.67%
DigitalOcean	28.76%	-127.00%	8.88%

Insider & Institutional Ownership

58.1% of CS Disco shares are owned by institutional investors. Comparatively, 49.8% of DigitalOcean shares are owned by institutional investors. 16.1% of CS Disco shares are owned by insiders. Comparatively, 1.0% of DigitalOcean shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for CS Disco and DigitalOcean, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CS Disco	1	1	2	0	2.25
DigitalOcean	0	5	9	0	2.64

CS Disco presently has a consensus target price of $8.00, indicating a potential upside of 97.87%. DigitalOcean has a consensus target price of $72.08, indicating a potential downside of 15.71%. Given CS Disco’s higher probable upside, analysts clearly believe CS Disco is more favorable than DigitalOcean.

Summary

DigitalOcean beats CS Disco on 9 of the 14 factors compared between the two stocks.

About CS Disco

CS Disco, Inc. provides cloud-native and artificial intelligence-powered legal solutions for legal hold, legal request, ediscovery, legal document review, and case management in the United States and internationally. It offers DISCO Request, a solution that automates response compliance for legal requests; and DISCO Ediscovery, a solution that automates the ediscovery process and saves legal departments from manual tasks associated with collecting, processing, enriching, searching, reviewing, analyzing, producing, and using enterprise data that is at issue in legal matters. The company also provides DISCO Hold, a solution that automates manual work to preserve data, notify custodians, track holds with a defensible audit trail, and collect data when ready; DISCO Review, an AI-powered document review solution that delivers legal document reviews; and DISCO Case Builder, a solution that allows legal professionals to collaborate with teams to build a compelling case by offering a single place to search, organize, and review witness testimony and other legal data. The company's solutions are used in various legal matters comprising litigation, investigation, compliance, and diligence. It serves enterprises, law firms, legal services providers, and governments. CS Disco, Inc. was founded in 2012 and is headquartered in Austin, Texas.

About DigitalOcean

DigitalOcean Holdings, Inc., through its subsidiaries, operates a cloud computing platform in North America, Europe, Asia, and internationally. The company’s platform provides on-demand infrastructure and platform tools for developers, start-ups, and small and growing digital businesses. It also offers infrastructure-as-a-service (IaaS) solutions comprising compute and storage services, as well as networking projects, including Cloud Firewalls software, Managed Load Balancers software, and Virtual Private Cloud (VPC). The company also provides platform-as-a-service (PaaS) solutions, such as managed databases; managed Kubernetes and container registry; application platform to build, deploy, and scale applications; Functions, a serverless compute solution; and Uptime for real-time uptime and latency alerts, as well as software-as-a-service (SaaS), including managed hosting and DigitalOcean Marketplace, a platform where developers can find pre-configured applications and solutions. In addition, it offers artificial intelligence (AI)/machine learning (ML) applications comprising GPU virtual machines for scaling AI applications; Notebooks, a simple cloud workspace that runs on GPUs that provides a managed interactive development environment for exploring data, and training and building machine learning models; and Deployments for deploying their machine learning model as an API endpoint. The company’s customers include software engineers, researchers, data scientists, system administrators, students, and hobbyists. Its customers use its platform in various industry verticals and for a range of use cases, such as web and mobile applications, website hosting, e-commerce, media and gaming, personal web projects, managed services, and AI/ML applications. DigitalOcean Holdings, Inc. was incorporated in 2012 and is headquartered in New York, New York.