It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. For example, the Rapid7, Inc. (NASDAQ:RPD) share price has soared 282% in the last three years. Most would be happy with that. It’s also good to see the share price up 46% over the last quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.
Rapid7 isn’t currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years Rapid7 has grown its revenue at 25% annually. That’s well above most other pre-profit companies. Along the way, the share price gained 56% per year, a solid pop by our standards. But it does seem like the market is paying attention to strong revenue growth. That’s not to say we think the share price is too high. In fact, it might be worth keeping an eye on this one.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
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 rewarded shareholders with a total shareholder return of 78% over the last year. That gain actually surpasses the 56% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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. Thank you for reading.