Critical Analysis: CS Disco (NYSE:LAW) and Sprout Social (NASDAQ:SPT)

CS Disco (NYSE:LAW) and Sprout Social (NASDAQ:SPT) are both small-cap technology companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, dividends, risk, institutional ownership, valuation, analyst recommendations and earnings.

Valuation and Earnings

This table compares CS Disco and Sprout Social”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	1.69	-$44.37 million	($0.63)	-6.48
Sprout Social	$457.55 million	1.29	-$43.33 million	($0.50)	-19.54

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
CS Disco	-24.20%	-26.58%	-19.89%
Sprout Social	-6.13%	-8.80%	-3.64%

Volatility & Risk

CS Disco has a beta of 1.88, indicating that its share price is 88% more volatile than the S&P 500. Comparatively, Sprout Social has a beta of 0.95, indicating that its share price is 5% less volatile than the S&P 500.

Insider & Institutional Ownership

58.1% of CS Disco shares are owned by institutional investors. 16.8% of CS Disco shares are owned by insiders. Comparatively, 9.6% of Sprout Social shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for CS Disco and Sprout Social, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CS Disco	1	1	2	0	2.25
Sprout Social	2	3	3	1	2.33

CS Disco presently has a consensus target price of $8.00, indicating a potential upside of 96.08%. Sprout Social has a consensus target price of $10.43, indicating a potential upside of 6.74%. Given CS Disco’s higher probable upside, research analysts clearly believe CS Disco is more favorable than Sprout Social.

Summary

Sprout Social beats CS Disco on 9 of the 15 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 Sprout Social

Sprout Social, Inc. designs, develops, and operates a web-based social media management platform in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company provides cloud software for social messaging, data and workflows in a unified system of record, intelligence, and action. It offers integrated tools, such as social engagement/response; publishing; reporting and analytics; social listening and business intelligence; reputation management; social commerce; employee advocacy; and automation and workflows. In addition, the company provides smart inbox, social customer relationship management, social monitoring and alerts, customer service tools, and automation; and centralized content planning, creation, and publishing, automated scheduling, content performance reporting, suggested content, message approval workflows, publishing permissions and governance, and content and asset libraries. Further, it offers social media; content performance, customer service and team, custom report builder, and reporting API; and market research, brand health, competitive insights, consumer trends, and product feedback; and social commerce, reputation management, employee advocacy, mobile applications, and chat bot creation and management. Additionally, the company offers professional services consisting of consulting and training services. It serves social and community management; public relations; marketing; influencer marketing; customer service and care; commerce, sales and customer acquisition; recruiting and hiring, product development, and business strategy; and small-and-medium-sized businesses, mid-market companies, enterprises, marketing agencies, government, non-profit, and educational institutions. Sprout Social, Inc. was incorporated in 2010 and is headquartered in Chicago, Illinois.