Rapid7, Inc. (RPD) DCF Valuation & Fundamental Primer
Rapid7, Inc. (RPD) currently trades at $15.20 with an enterprise value of $4.59B. Our proprietary institutional model rates Rapid7, Inc. at 73/100 (Grade: B+ · Quality Software Operator). The current market price prices in an implied 5-year revenue CAGR of -3.0% vs. historical growth of 19.7% (Substantial Margin of Safety).
Institutional fundamental teardown of Rapid7, Inc. (RPD) covering SEC 10-K/10-Q cash flow conversion, SBC dilution friction, and Reverse-DCF valuation hurdles.
Rapid7, Inc. (RPD) 3-Scenario DCF Valuation Range
Institutional Software Quality Scorecard (73/100 · Grade B+)
Solid software model with clear operating leverage, partially offset by standard SBC or moderate burn.
Elite deferred revenue float; FCF exceeds operating income by >20%
Standard software SBC dilution; modest equity transfer to employees
High-quality software margins with healthy balanced growth and profitability
Moderate leverage or cash burn; monitor liquidity runway
Core Investment Strengths & Moats
- High-grade cash conversion: FCF is 480% of EBIT driven by upfront annual collections
- Healthy unit economics: 70.3% gross margin
Key Operational & Dilution Risks
Reverse-DCF Solver: What Growth is Priced Into RPD?
The current share price only requires -3.0% 5-year CAGR, well below historical growth of 19.7%. If the company maintains baseline execution, there is asymmetric upside.
Rapid7, Inc. (RPD) 5-Year Fundamental Forecast
| Statement Line Item | TTM Audited Base | TTM | Y1 | Y2 | Y3 | Y4 | Y5 |
|---|---|---|---|---|---|---|---|
| Revenue | $844.0M | $844.0M | $1.01B | $1.21B | $1.45B | $1.73B | $2.07B |
| Gross Profit | $593.0M | $593.0M | $709.6M | $849.2M | $1.02B | $1.22B | $1.46B |
| Operating Income (EBIT) | $35.0M | $35.0M | $41.9M | $50.2M | $60.0M | $71.8M | $86.0M |
| Stock-Based Compensation (SBC) | $108.0M | $107.9M | $129.2M | $154.6M | $185.0M | $221.4M | $264.9M |
| Unlevered Free Cash Flow (FCF) | $168.2M | $168.2M | $201.3M | $240.9M | $288.3M | $345.0M | $412.8M |
| SBC-Adjusted True Cash Flow | $60.3M | $60.3M | $72.1M | $86.3M | $103.3M | $123.6M | $147.9M |
Cybersecurity & Identity Peer Comparables Matrix
| Company | Ticker | Market Cap | TTM Revenue | Gross Margin | FCF Margin | Rule of 40 | SBC % Rev | EV / Rev |
|---|---|---|---|---|---|---|---|---|
| Rapid7, Inc. | RPD | $974.6M | $844.0M | 70.3% | 19.9% | 39.6% | 12.8% | 2.1× |
| CrowdStrike Holdings | CRWD | $86.18B | $3.95B | 78.0% | 31.2% | 62.2% | 19.5% | 20.9× |
| Palo Alto Networks | PANW | $126.34B | $8.03B | 74.4% | 37.8% | 56.3% | 14.2% | 15.0× |
| Fortinet, Inc. | FTNT | $10.37B | $1.11B | 72.2% | 11.2% | 32.7% | 9.6% | 9.1× |
| Zscaler, Inc. | ZS | $32.45B | $2.76B | 74.5% | 21.4% | 47.4% | 12.7% | 11.4× |
| QLYS | QLYS | $34.99B | $2.79B | 80.6% | 14.5% | 31.1% | 16.3% | 12.0× |
| SentinelOne, Inc. | S | $51.61B | $4.26B | 82.7% | 24.6% | 50.9% | 13.7% | 11.5× |
| Peer Cohort Median Benchmark (N=6) | 76.3% | 23.0% | 49.1% | 13.9% | 11.8× | |||
EV / Revenue Multiple Compression Stress Test
| Multiple Scenario | EV / Revenue | Implied Enterprise Value | Implied Equity Value | Implied Share Price | Delta vs Current |
|---|---|---|---|---|---|
| Current Multiple | 2.2× | $1.81B | $974.6M | $15.20 | 0.0% |
| -20% Multiple Compression | 1.7× | $1.45B | $611.6M | $9.54 | -20.0% |
| -35% Multiple Compression | 1.4× | $1.18B | $339.4M | $5.29 | -35.0% |
| Software Baseline Floor (5.0× EV/Rev) | 5.0× | $4.22B | $3.38B | $52.71 | +132.5% |
Frequently Asked Questions: Rapid7, Inc. (RPD) Valuation
What is Rapid7, Inc. (RPD)'s intrinsic DCF valuation and implied share price?
Based on audited SEC 10-K/10-Q filings and a 5-year 3-statement discounted cash flow (DCF) model, Rapid7, Inc. (RPD) has a Base Case implied value of $58.54 per share (with a Bear Case of $18.05 and a Bull Case of $114.47), compared to its current price of $15.20. The model discounts projected free cash flows at a 10.0% WACC and a 2.5% terminal growth rate.
What is Rapid7, Inc. (RPD)'s Rule of 40 score and Free Cash Flow margin?
Rapid7, Inc. achieves a Rule of 40 score of 39.6%, combining a 19.7% revenue growth run-rate with a 19.9% TTM free cash flow margin on $844.0M in trailing twelve-month revenue. In the Cybersecurity & Identity peer cohort, the median Rule of 40 benchmark is 49.1%.
What revenue growth rate is priced into RPD stock according to Reverse-DCF analysis?
At $15.20 per share (Enterprise Value of $1.81B), our Reverse-DCF solver indicates the market is pricing in a 5-year implied revenue CAGR of -3.0%, compared to Rapid7, Inc.'s historical CAGR of 19.7%. Overall market expectations are rated as "Substantial Margin of Safety".
How does Rapid7, Inc. compare to Cybersecurity & Identity software peers?
Rapid7, Inc. (RPD) earns an institutional Software Quality Score of 73/100 (Grade B+ — Quality Software Operator). Across its Cybersecurity & Identity peer group (CRWD, PANW, FTNT, ZS, QLYS), the cohort trades at a median EV/TTM Revenue multiple of 11.8× and a median gross margin of 76.3%.
How does Stock-Based Compensation (SBC) impact Rapid7, Inc. (RPD)'s valuation?
Rapid7, Inc. recorded $108.0M in TTM stock-based compensation (12.8% of revenue). When treating SBC as a cash-equivalent compensation expense, Rapid7, Inc.'s SBC-adjusted free cash flow yield is 6.2%, scoring 16/25 on our Shareholder Dilution Friction pillar.