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Is Now An Opportune Moment To Examine Rapid7, Inc. (NASDAQ:RPD)?

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·3 min read
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Rapid7, Inc. (NASDAQ:RPD), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Rapid7’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Rapid7

Is Rapid7 still cheap?

Rapid7 appears to be overvalued by 35% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$71.96 on the market compared to my intrinsic value of $53.47. This means that the opportunity to buy Rapid7 at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Rapid7’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Rapid7?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Rapid7's earnings over the next few years are expected to increase by 29%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? RPD’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe RPD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on RPD for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for RPD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Rapid7 has 4 warning signs (and 1 which can't be ignored) we think you should know about.

If you are no longer interested in Rapid7, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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.