Intrinsic value of Rapid7, Inc. - RPD

Previous Close

$57.06

  Intrinsic Value

$5.01

stock screener

  Rating & Target

str. sell

-91%

Previous close

$57.06

 
Intrinsic value

$5.01

 
Up/down potential

-91%

 
Rating

str. sell

We calculate the intrinsic value of RPD stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.7

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.10
  17.69
  16.42
  15.28
  14.25
  13.33
  12.49
  11.74
  11.07
  10.46
  9.92
  9.42
  8.98
  8.58
  8.23
  7.90
  7.61
  7.35
  7.12
  6.90
  6.71
  6.54
  6.39
  6.25
  6.12
  6.01
  5.91
  5.82
  5.74
  5.66
Revenue, $m
  291
  342
  398
  459
  524
  594
  669
  747
  830
  917
  1,007
  1,102
  1,201
  1,305
  1,412
  1,523
  1,639
  1,760
  1,885
  2,015
  2,151
  2,291
  2,438
  2,590
  2,749
  2,914
  3,086
  3,266
  3,453
  3,649
Variable operating expenses, $m
  318
  372
  432
  496
  565
  639
  717
  800
  888
  979
  1,064
  1,164
  1,269
  1,378
  1,491
  1,609
  1,731
  1,859
  1,991
  2,128
  2,271
  2,420
  2,575
  2,735
  2,903
  3,078
  3,259
  3,449
  3,647
  3,854
Fixed operating expenses, $m
  31
  31
  32
  33
  33
  34
  35
  36
  36
  37
  38
  39
  40
  41
  42
  42
  43
  44
  45
  46
  47
  48
  49
  51
  52
  53
  54
  55
  56
  58
Total operating expenses, $m
  349
  403
  464
  529
  598
  673
  752
  836
  924
  1,016
  1,102
  1,203
  1,309
  1,419
  1,533
  1,651
  1,774
  1,903
  2,036
  2,174
  2,318
  2,468
  2,624
  2,786
  2,955
  3,131
  3,313
  3,504
  3,703
  3,912
Operating income, $m
  -58
  -62
  -66
  -70
  -74
  -79
  -84
  -89
  -94
  -100
  -95
  -101
  -107
  -114
  -121
  -128
  -135
  -143
  -151
  -159
  -168
  -177
  -186
  -196
  -206
  -216
  -227
  -238
  -250
  -262
EBITDA, $m
  -40
  -42
  -44
  -47
  -50
  -52
  -56
  -59
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -89
  -94
  -99
  -103
  -108
  -114
  -119
  -125
  -130
  -136
  -142
  -149
  -156
  -163
  -170
Interest expense (income), $m
  0
  10
  15
  20
  26
  33
  40
  48
  56
  64
  73
  83
  92
  103
  113
  124
  136
  148
  161
  174
  187
  201
  216
  231
  247
  264
  281
  299
  317
  337
  357
Earnings before tax, $m
  -68
  -77
  -86
  -96
  -107
  -119
  -131
  -144
  -158
  -173
  -177
  -193
  -210
  -227
  -245
  -264
  -284
  -304
  -325
  -347
  -369
  -393
  -418
  -443
  -469
  -497
  -526
  -556
  -587
  -619
Tax expense, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -68
  -77
  -86
  -96
  -107
  -119
  -131
  -144
  -158
  -173
  -177
  -193
  -210
  -227
  -245
  -264
  -284
  -304
  -325
  -347
  -369
  -393
  -418
  -443
  -469
  -497
  -526
  -556
  -587
  -619

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  637
  750
  873
  1,007
  1,150
  1,303
  1,466
  1,638
  1,820
  2,010
  2,209
  2,418
  2,635
  2,861
  3,096
  3,341
  3,595
  3,860
  4,134
  4,420
  4,716
  5,025
  5,346
  5,680
  6,028
  6,391
  6,768
  7,162
  7,573
  8,002
Adjusted assets (=assets-cash), $m
  637
  750
  873
  1,007
  1,150
  1,303
  1,466
  1,638
  1,820
  2,010
  2,209
  2,418
  2,635
  2,861
  3,096
  3,341
  3,595
  3,860
  4,134
  4,420
  4,716
  5,025
  5,346
  5,680
  6,028
  6,391
  6,768
  7,162
  7,573
  8,002
Revenue / Adjusted assets
  0.457
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
  0.456
Average production assets, $m
  79
  93
  108
  124
  142
  161
  181
  202
  225
  248
  273
  299
  326
  354
  383
  413
  444
  477
  511
  546
  583
  621
  661
  702
  745
  790
  836
  885
  936
  989
Working capital, $m
  -164
  -194
  -225
  -260
  -297
  -336
  -378
  -423
  -470
  -519
  -570
  -624
  -680
  -738
  -799
  -862
  -928
  -996
  -1,067
  -1,141
  -1,217
  -1,297
  -1,380
  -1,466
  -1,556
  -1,649
  -1,747
  -1,849
  -1,955
  -2,065
Total debt, $m
  264
  363
  472
  589
  716
  851
  994
  1,146
  1,306
  1,473
  1,649
  1,833
  2,024
  2,223
  2,430
  2,646
  2,870
  3,103
  3,345
  3,596
  3,858
  4,130
  4,413
  4,707
  5,013
  5,333
  5,665
  6,013
  6,375
  6,752
Total liabilities, $m
  561
  661
  769
  887
  1,013
  1,148
  1,292
  1,443
  1,603
  1,771
  1,946
  2,130
  2,321
  2,520
  2,728
  2,943
  3,167
  3,400
  3,642
  3,894
  4,155
  4,427
  4,710
  5,004
  5,311
  5,630
  5,963
  6,310
  6,672
  7,050
Total equity, $m
  76
  89
  104
  120
  137
  155
  174
  195
  217
  239
  263
  288
  314
  340
  368
  398
  428
  459
  492
  526
  561
  598
  636
  676
  717
  760
  805
  852
  901
  952
Total liabilities and equity, $m
  637
  750
  873
  1,007
  1,150
  1,303
  1,466
  1,638
  1,820
  2,010
  2,209
  2,418
  2,635
  2,860
  3,096
  3,341
  3,595
  3,859
  4,134
  4,420
  4,716
  5,025
  5,346
  5,680
  6,028
  6,390
  6,768
  7,162
  7,573
  8,002
Debt-to-equity ratio
  3.480
  4.070
  4.540
  4.920
  5.230
  5.490
  5.700
  5.880
  6.030
  6.160
  6.270
  6.370
  6.450
  6.530
  6.600
  6.660
  6.710
  6.760
  6.800
  6.840
  6.870
  6.910
  6.940
  6.960
  6.990
  7.010
  7.030
  7.050
  7.070
  7.090
Adjusted equity ratio
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119
  0.119

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -68
  -77
  -86
  -96
  -107
  -119
  -131
  -144
  -158
  -173
  -177
  -193
  -210
  -227
  -245
  -264
  -284
  -304
  -325
  -347
  -369
  -393
  -418
  -443
  -469
  -497
  -526
  -556
  -587
  -619
Depreciation, amort., depletion, $m
  19
  20
  21
  23
  24
  26
  28
  30
  32
  34
  26
  28
  30
  33
  36
  39
  42
  45
  48
  51
  54
  58
  62
  66
  70
  74
  78
  83
  87
  92
Funds from operations, $m
  -49
  -57
  -65
  -73
  -83
  -93
  -103
  -114
  -126
  -139
  -152
  -165
  -179
  -194
  -210
  -225
  -242
  -259
  -277
  -296
  -315
  -335
  -356
  -377
  -400
  -423
  -448
  -473
  -499
  -527
Change in working capital, $m
  -26
  -29
  -32
  -34
  -37
  -40
  -42
  -44
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -97
  -102
  -106
  -111
Cash from operations, $m
  -23
  -28
  -33
  -39
  -46
  -53
  -61
  -70
  -79
  -89
  -100
  -111
  -123
  -136
  -149
  -162
  -176
  -191
  -206
  -222
  -238
  -255
  -273
  -291
  -310
  -330
  -350
  -371
  -393
  -416
Maintenance CAPEX, $m
  -6
  -7
  -9
  -10
  -12
  -13
  -15
  -17
  -19
  -21
  -23
  -26
  -28
  -30
  -33
  -36
  -39
  -42
  -45
  -48
  -51
  -54
  -58
  -62
  -66
  -70
  -74
  -78
  -83
  -87
New CAPEX, $m
  -13
  -14
  -15
  -16
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -53
Cash from investing activities, $m
  -19
  -21
  -24
  -26
  -30
  -32
  -35
  -38
  -41
  -45
  -48
  -52
  -55
  -58
  -62
  -66
  -70
  -75
  -79
  -83
  -88
  -92
  -98
  -103
  -109
  -115
  -121
  -127
  -134
  -140
Free cash flow, $m
  -42
  -49
  -57
  -65
  -75
  -85
  -96
  -108
  -121
  -134
  -148
  -163
  -178
  -194
  -211
  -228
  -246
  -265
  -285
  -305
  -326
  -348
  -371
  -394
  -419
  -444
  -471
  -498
  -527
  -557
Issuance/(repayment) of debt, $m
  89
  99
  109
  118
  126
  135
  143
  152
  160
  168
  176
  183
  191
  199
  207
  216
  224
  233
  242
  251
  261
  272
  283
  294
  306
  319
  333
  347
  362
  378
Issuance/(repurchase) of shares, $m
  80
  90
  101
  112
  124
  137
  151
  165
  180
  196
  201
  218
  236
  254
  273
  293
  314
  335
  358
  381
  405
  430
  456
  483
  511
  540
  571
  603
  636
  670
Cash from financing (excl. dividends), $m  
  169
  189
  210
  230
  250
  272
  294
  317
  340
  364
  377
  401
  427
  453
  480
  509
  538
  568
  600
  632
  666
  702
  739
  777
  817
  859
  904
  950
  998
  1,048
Total cash flow (excl. dividends), $m
  128
  140
  152
  164
  176
  187
  198
  209
  219
  229
  228
  239
  249
  259
  270
  280
  291
  303
  315
  327
  340
  354
  368
  383
  399
  415
  433
  451
  471
  492
Retained Cash Flow (-), $m
  -80
  -90
  -101
  -112
  -124
  -137
  -151
  -165
  -180
  -196
  -201
  -218
  -236
  -254
  -273
  -293
  -314
  -335
  -358
  -381
  -405
  -430
  -456
  -483
  -511
  -540
  -571
  -603
  -636
  -670
Prev. year cash balance distribution, $m
  24
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  71
  50
  52
  52
  51
  50
  47
  44
  39
  34
  28
  21
  13
  5
  -4
  -13
  -22
  -32
  -43
  -54
  -65
  -76
  -88
  -100
  -112
  -125
  -138
  -151
  -165
  -179
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  68
  46
  45
  43
  40
  36
  32
  27
  22
  18
  13
  9
  5
  2
  -1
  -3
  -5
  -6
  -7
  -7
  -7
  -6
  -6
  -5
  -4
  -4
  -3
  -2
  -2
  -1
Current shareholders' claim on cash, %
  88.8
  79.4
  71.3
  64.4
  58.3
  53.0
  48.3
  44.2
  40.4
  37.1
  34.2
  31.6
  29.2
  27.0
  25.0
  23.2
  21.5
  19.9
  18.5
  17.1
  15.9
  14.8
  13.7
  12.8
  11.9
  11.0
  10.3
  9.6
  8.9
  8.3

Rapid7, Inc. is a provider analytics for security and information technology (IT) operations that enable organizations to implement an analytics-driven approach to cyber security and IT operations. The Company's analytics enable organizations to contextualize and prioritize the threats facing their physical, virtual and cloud assets, including those posed by the behaviors of their users. Leveraging its IT data and analytics platform, its solutions enable organizations to manage their cyber security exposure and manage IT operations. Its solutions empower organizations to prevent attacks by providing visibility into vulnerabilities, and allow them to detect compromises, respond to breaches and correct the underlying causes of attacks. By providing a unified IT and security platform, with automated workflow, it enables IT and security to work together to develop, operate and secure their environment.

FINANCIAL RATIOS  of  Rapid7, Inc. (RPD)

Valuation Ratios
P/E Ratio -49.5
Price to Sales 15.5
Price to Book 57.8
Price to Tangible Book
Price to Cash Flow 269.8
Price to Free Cash Flow 607
Growth Rates
Sales Growth Rate 41.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 25%
Cap. Spend. - 3 Yr. Gr. Rate 10.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -20.7%
Ret/ On Assets - 3 Yr. Avg. -31.2%
Return On Total Capital -89.1%
Ret/ On T. Cap. - 3 Yr. Avg. -33.5%
Return On Equity -89.1%
Return On Equity - 3 Yr. Avg. -98.4%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 75.2%
Gross Margin - 3 Yr. Avg. 74.5%
EBITDA Margin -26.8%
EBITDA Margin - 3 Yr. Avg. -33.1%
Operating Margin -31.2%
Oper. Margin - 3 Yr. Avg. -36.8%
Pre-Tax Margin -31.2%
Pre-Tax Margin - 3 Yr. Avg. -39%
Net Profit Margin -31.2%
Net Profit Margin - 3 Yr. Avg. -39.7%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -1.7%
Payout Ratio 0%

RPD stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the RPD stock intrinsic value calculation we used $244 million for the last fiscal year's total revenue generated by Rapid7, Inc.. The default revenue input number comes from 0001 income statement of Rapid7, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our RPD stock valuation model: a) initial revenue growth rate of 19.1% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for RPD is calculated based on our internal credit rating of Rapid7, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Rapid7, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of RPD stock the variable cost ratio is equal to 110.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $30 million in the base year in the intrinsic value calculation for RPD stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Rapid7, Inc..

Corporate tax rate of 27% is the nominal tax rate for Rapid7, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the RPD stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for RPD are equal to 27.1%.

Life of production assets of 10.7 years is the average useful life of capital assets used in Rapid7, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for RPD is equal to -56.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $87.319 million for Rapid7, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 48.057 million for Rapid7, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Rapid7, Inc. at the current share price and the inputted number of shares is $2.7 billion.

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