Rapid7 (RPD) AI Stock Analysis

• Market Cap: $1.54B
• Dividend Yield: N/A
• Average Volume (3M): 1.00M
• Price to Earnings (P/E): 60.6
• Beta (1Y): 1.25
• Revenue Growth: 8.53%
• EPS Growth: N/A
• Country: US
• Employees: 2,413
• Sector: Technology
• Sector Strength: 63
• Industry: Software - Infrastructure
• EPS (TTM): 0.40
• Shares Outstanding: 63,968,853
• 10 Day Avg. Volume: 943,612
• 30 Day Avg. Volume: 1,000,456
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 2.14
• Price to Cash Flow (P/CF): 7.10
• P/FCF Ratio: 7.70
• Enterprise Value/Market Cap: 1.99
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 5.16
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $34.67
• Price Target Upside: 44.10% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 21

Rapid7's overall score is driven by strong financial performance, especially in revenue growth and profitability improvements, albeit offset by high leverage. Technical indicators show negative momentum, and the stock appears overvalued. The earnings call provides a balanced view with both strengths and challenges, while recent corporate events are positive but have minor impact.

Positive Factors

Product Pipeline

The pipeline for Exposure Command has ramped nicely over the past two quarters and essentially no growth contribution from the product has been baked into the FY25 guidance.

Revenue Growth

Net ARR additions are expected to increase in 2025, indicating potential growth in revenue.

Sales and Platform Improvements

The company has made strides in improving both its sales structure and platform capabilities that should set the company up well for growth as macro conditions improve.

Negative Factors

Competitive Pressure

The traditional VM space is experiencing intense competition and accelerating cloud migrations, which are causing growth in the market to materially slow.

Financial Performance

RPD's full year revenue, non-GAAP EPS and FCF guidance was surprisingly disappointing, coming significantly below Street expectations.

Profitability and Margins

The decrease in margins was much larger than anticipated, leading to a weaker-than-expected operating income guide.

Rapid7 Business Overview & Revenue Model

Company Description

Rapid7, Inc. provides cyber security solutions. The company offers a cloud-native insight platform that enables customers to create and manage analytics-driven cyber security risk management programs. Its platform includes InsightIDR, an incident detection and response solution; InsightCloudSec, a solution that integrates posture management, workload protection, infrastructure entitlements management, infrastructure-as-code security, and Kubernetes protection; InsightVM, a vulnerability risk management solution that is designed to provide a way to collect vulnerability data, prioritize risk, and automate remediation; InsightAppSec, which provides application security testing that analyzes web applications for security vulnerabilities; and InsightConnect, a security orchestration and automation response solution that is used by security professionals. The company's other products include DivvyCloud, a cloud security posture management solution; Nexpose, an on-premises version of company's vulnerability risk management solution; AppSpider, an on-premises version of company's application security testing solution; and Metasploit, a penetration testing software solution, as well as professional services. It offers its products through term or perpetual software licenses, cloud-based subscriptions, and managed services. The company serves customers in a range of industries, including technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government, and professional services industries through sales teams, and indirect channel partner relationships, as well as directly in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company was incorporated in 2000 and is headquartered in Boston, Massachusetts.

How the Company Makes Money

Rapid7 generates revenue through a combination of subscription services, maintenance and support fees, and professional services. The primary revenue stream comes from its cloud-based subscription offerings, where customers pay for access to the Insight Platform and its suite of security solutions on a subscription basis. This model ensures a steady and recurring revenue stream. Additionally, the company offers maintenance and support services for its products, providing technical assistance and updates, which contribute to its revenue. Professional services, including consulting, implementation, and training, also play a significant role in the company's earnings, as organizations often require expert guidance to effectively deploy and manage Rapid7's solutions. Partnerships with technology vendors and resellers further amplify Rapid7's market reach and revenue potential, as these collaborations help to expand its customer base and enhance the integration of its products into broader IT ecosystems.

Rapid7 Financial Statement Overview

Summary

Rapid7 exhibits strong revenue growth and improving profitability, with significant margin improvements in the income statement and enhanced cash generation in the cash flow statement. However, the high leverage indicated by the balance sheet poses a potential risk.

Income Statement

Rapid7's income statement shows a robust revenue growth trajectory, with a 8.51% increase from 2023 to TTM (Trailing-Twelve-Months) 2024. Gross profit margin stands at 69.59%, indicating strong operational efficiency. The net profit margin improved significantly to 3.46% from a loss position in 2023. EBIT and EBITDA margins are positive, reflecting a turnaround in profitability.

Balance Sheet

The balance sheet reveals a high debt-to-equity ratio, indicative of financial risk, due to low stockholders' equity and high total debt. However, the return on equity has improved to 164.73% in TTM 2024, showcasing increased profitability on equity. Equity ratio remains low at 1.07%, highlighting potential leverage concerns.

Cash Flow

Cash flow analysis shows a strong free cash flow growth rate of 87.77% from 2023 to TTM 2024, indicating improved cash generation. The operating cash flow to net income ratio of 5.89 signifies strong cash conversion. Free cash flow to net income ratio is also strong at 5.41, reflecting efficient cash management.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
844.01M	777.71M	685.08M	535.40M	411.49M
	Gross Profit
592.97M	545.97M	470.73M	366.46M	289.97M
	EBIT
35.03M	-80.73M	-111.61M	-120.06M	-74.10M
	EBITDA
97.31M	-39.14M	-70.28M	-88.12M	-50.09M
	Net Income Common Stockholders
25.53M	-149.26M	-124.72M	-146.33M	-98.85M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
521.71M	383.17M	291.45M	223.43M	312.46M
	Total Assets
1.65B	1.51B	1.36B	1.30B	913.12M
	Total Debt
1.02B	1.02B	914.34M	912.56M	463.94M
	Net Debt
683.49M	810.95M	707.05M	747.98M	290.32M
	Total Liabilities
1.63B	1.62B	1.48B	1.42B	841.59M
	Stockholders Equity
17.71M	-118.18M	-120.07M	-126.00M	71.54M
Cash Flow		Free Cash Flow
168.25M	84.03M	40.68M	35.05M	-15.04M
	Operating Cash Flow
171.67M	104.28M	78.20M	53.92M	4.89M
	Investing Cash Flow
-46.52M	-178.75M	-39.99M	-325.38M	-156.29M
	Financing Cash Flow
5.58M	79.60M	7.42M	264.13M	200.93M

Rapid7 Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 24.06
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RPD, the sentiment is Neutral. The current price of 24.06 is below the 20-day moving average (MA) of 24.15, below the 50-day MA of 27.59, and below the 200-day MA of 36.10, indicating a bearish trend. The MACD of -1.43 indicates Negative momentum. The RSI at 43.72 is Neutral, neither overbought nor oversold. The STOCH value of 67.42 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for RPD.

Rapid7 Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
QLYS	76 Outperform	$4.62B	27.23	41.09%	―	10.40%	14.78%
CRWD	76 Outperform	$105.32B	721.64	-0.69%	―	29.39%	-119.62%
TENB	63 Neutral	$3.96B	―	-9.73%	―	12.68%	54.80%
RPD	61 Neutral	$1.54B	60.62	164.75%	―	8.53%	―
Sector *	59 Neutral	$10.73B	10.11	-6.65%	3.02%	7.41%	-11.17%
VRNS	56 Neutral	$4.73B	―	-20.26%	―	10.38%	6.88%
SAIL	46 Neutral	$9.53B	―	-11.15%	―	23.16%	-9.81%

Rapid7 Corporate Events

Rapid7 Expands Board with New Independent Directors

On March 21, 2025, Rapid7 entered into a Cooperation Agreement with JANA Partners Management, LP, resulting in the expansion of its Board of Directors from eight to eleven members. This agreement includes the appointment of Wael Mohamed, Michael Burns, and Kevin Galligan as independent directors, with these changes set to enhance Rapid7’s strategic execution and shareholder value. The appointments are part of Rapid7’s efforts to accelerate growth and operational efficiency, positioning the company for sustainable, profitable growth in the cybersecurity industry.