Company Overview
Rapid7, Inc. operates within the technology sector, specifically focusing on the software infrastructure industry, where it delivers cybersecurity software and services under brand names such as Rapid7, Nexpose, and Metasploit. The company's core operations involve deploying the Rapid7 Agent, a software-based solution utilized across on-premises and cloud environments to centralize and monitor data, alongside the Rapid7 Network Sensor for network visibility. As a public entity, Rapid7 maintains a market capitalization of $369.00M and employs 2613 individuals to support its extensive product portfolio. With an annual revenue of $859.79M, the company demonstrates significant operational scale, positioning it as a substantial player in the cybersecurity market capable of sustaining a large workforce and complex software delivery models. These financial figures indicate that while the company has established a robust revenue base, its valuation relative to sales suggests a specific market perspective on its current profitability and growth trajectory within the competitive software landscape.
Financial Health
Rapid7 reported a revenue of $859.79M for the trailing twelve months, generating a net income of $23.38M and an EBITDA of $57.54M during the same period. The substantial gap between the $859.79M in revenue and the $23.38M in net income highlights a cost structure where operating expenses and taxes consume a significant portion of top-line growth, resulting in a profit margin of 2.7%. The company recorded $123.47M in free cash flow, which provides a strong buffer for financial flexibility, allowing management to fund operations, invest in R&D, or manage debt obligations without relying solely on external capital markets. Profitability metrics reveal a gross margin of 70.3%, indicating efficient cost of goods sold management typical of software licensing models, while the operating margin of 1.0% suggests high overhead costs or significant investments in sales and administrative functions that compress operating profitability before the bottom line. On the balance sheet, the company holds $474.67M in cash against $968.37M in total debt, creating a debt-to-equity ratio of 625.84, which characterizes a highly leveraged financial structure. Despite the high leverage, the current ratio stands at 1.28, indicating that the company possesses sufficient current assets to cover its short-term liabilities, suggesting manageable immediate liquidity pressures. Return on equity is reported at 27.1%, reflecting high leverage amplification of shareholder returns, whereas return on assets is 0.4%, revealing that the company's asset base is generating minimal returns relative to the capital employed, a dynamic often seen in asset-light software businesses with high debt loads.
Valuation Assessment
The valuation of Rapid7 is characterized by a trailing P/E ratio of 15.56 and a forward P/E of 3.51, implying that the market expects earnings growth to be significantly higher than the current earnings base to justify the trailing multiple. The wide divergence between these two metrics suggests the market anticipates a substantial expansion in profitability that is not yet reflected in historical performance. Rapid7 trades at a price-to-book ratio of 2.38, indicating that the market values the company at a premium above its book value, likely due to intangible assets, brand value, and future growth potential not captured on the balance sheet. Alternative valuation metrics provide further context, with a price-to-sales ratio of 0.43 and an EV/EBITDA of 14.99, suggesting the market is pricing the company based on sales efficiency rather than pure earnings power at this specific moment. Price metrics show a 52-week high of $30.95 and a 52-week low of $5.47, and without a specific current share price provided in the source facts, the exact percentage distance from the high cannot be calculated, but the range demonstrates significant volatility over the last year. The stock exhibits a beta of 0.89, which indicates that the company's price volatility is slightly lower than the broader market, suggesting it may be less sensitive to general market swings than the average technology stock.
Growth & Income
Rapid7 has recorded a revenue growth of 0.5% year-over-year while achieving an earnings growth of 39.0% year-over-year, indicating that earnings are expanding at a rate far faster than revenue. This divergence implies that the company is improving its operating leverage and cost efficiency, allowing net income to rise disproportionately to sales volume, potentially due to margin expansion or non-recurring cost adjustments. As a non-dividend payer, the company maintains a dividend yield of N/A and a payout ratio of 0.0%, meaning all earnings are retained and reinvested into the business rather than distributed to shareholders. This reinvestment strategy aligns with the growth profile of a software infrastructure company that prioritizes funding product development and market expansion over immediate income generation for investors. The overall growth and income profile presents a scenario of high earnings velocity paired with zero current income distribution, relying entirely on capital appreciation derived from the widening gap between revenue and earnings as well as the company's ability to navigate its highly leveraged balance sheet.