Rapid7's Stock Surges on Takeover Buzz and Strong Growth
Rapid7, Inc.'s shares are trading at $20.81, with trailing and forward P/E ratios of 47.30 and 9.95 respectively. The company has drawn attention from activist investors and potential acquirers, with JANA Partners controlling over 14% of its shares.
Rapid7 has seen significant growth, pivoting from standalone solutions to an integrated Command Platform. This shift has led to impressive revenue growth, from $411.5 million in 2020 to a projected $858 million in 2024, with a 20% CAGR. Profitability has also improved, with $25.5 million net income expected in 2024. The company maintains a strong cash position of $600 million, generating interest income exceeding debt costs.
The bullish thesis on Rapid7, published on Show me the incentives...'s Substack, highlights the company's potential as a credible acquisition candidate. JANA Partners, with board representation, is pressing for governance changes and operational improvements. Cannae Holdings, led by Bill Foley, also holds a position and has resources for a potential acquisition. Current guidance projects an attractive ~10% FCF yield and ~9.8x EV/EBITDA valuation.
With its strong financial performance and growth potential, Rapid7 has been the subject of takeover speculation since 2023. Interested parties have included TPG, Alphabet, and Thoma Bravo. Insiders are financially incentivized to pursue a transaction, making Rapid7 an attractive target for potential acquirers.
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