The Rapid7, Inc. (NASDAQ:RPD) share price has had a bad week, falling 10%. But that doesn’t undermine the fantastic longer term performance (measured over five years). In that time, the share price has soared some 750% higher! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. It really delights us to see such great share price performance for investors.
While the stock has fallen 10% this week, it’s worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Given that Rapid7 didn’t make a profit in the last twelve months, we’ll focus on revenue growth to form a quick view of its business development. When a company doesn’t make profits, we’d generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
For the last half decade, Rapid7 can boast revenue growth at a rate of 24% per year. Even measured against other revenue-focussed companies, that’s a good result. Arguably, this is well and truly reflected in the strong share price gain of 53%(per year) over the same period. Despite the strong run, top performers like Rapid7 have been known to go on winning for decades. So we’d recommend you take a closer look at this one, but keep in mind the market seems optimistic.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Rapid7 is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
A Different Perspective
We’re pleased to report that Rapid7 shareholders have received a total shareholder return of 27% over one year. However, the TSR over five years, coming in at 53% per year, is even more impressive. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. It’s always interesting to track share price performance over the longer term. But to understand Rapid7 better, we need to consider many other factors. For example, we’ve discovered 4 warning signs for Rapid7 (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.