Rapid7, Inc. (NASDAQ:RPD) shareholders might understandably be very concerned that the share price has dropped 34% in the last quarter. But over five years returns have been remarkably great. Indeed, the share price is up a whopping 327% in that time. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
The past week has proven to be lucrative for Rapid7 investors, so let's see if fundamentals drove the company's five-year performance.
Rapid7 wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last 5 years Rapid7 saw its revenue grow at 24% per year. That's well above most pre-profit companies. Fortunately, the market has not missed this, and has pushed the share price up by 34% per year in that time. It's never too late to start following a top notch stock like Rapid7, since some long term winners go on winning for decades. On the face of it, this looks lke a good opportunity, although we note sentiment seems very positive already.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. If you are thinking of buying or selling Rapid7 stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
While the broader market lost about 17% in the twelve months, Rapid7 shareholders did even worse, losing 25%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 34%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should learn about the 4 warning signs we've spotted with Rapid7 (including 1 which is concerning) .
Rapid7 is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.