Rapid7, Inc. (NASDAQ:RPD) shareholders might be concerned after seeing the share price drop 17% in the last quarter. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. The share price marched upwards over that time, and is now 156% higher than it was. To some, the recent share price pullback wouldn't be surprising after such a good run. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.
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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Rapid7's revenue trended up 24% each year over three years. That's much better than most loss-making companies. Along the way, the share price gained 37% per year, a solid pop by our standards. But it does seem like the market is paying attention to strong revenue growth. Nonetheless, we'd say Rapid7 is still worth investigating - successful businesses can often keep growing for long periods.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Rapid7 is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Rapid7 shareholders are down 14% for the year, falling short of the market return. Meanwhile, the broader market slid about 0.6%, likely weighing on the stock. Investors are up over three years, booking 37% per year, much better than the more recent returns. Sometimes when a good quality long term winner has a weak period, it's turns out to be an opportunity, but you really need to be sure that the quality is there. 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 is a bit concerning!) that you should be aware of before investing here.
But note: Rapid7 may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.