Value
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.8 |
| P/S | 9.8 |
| EV/EBITDA | 2.3 |
| Fwd P/E | 9.9 |
| PEG | 10.0 |
| Analyst target | 3.0 |
- ▸Forward P/E: 6.0x
- ▸PEG: 0.50
RPD · Why this verdict
Why Rapid7 (RPD) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.2/10
ConfidenceHIGH
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Rapid7 converts net income into free cash flow at 629%, even though it has no competitive moat and a failing Rule of 40 score of 16. Quality breakdown | FCF-to-net-income conversion should stay well above 200% even as the combined growth-plus-margin measure climbs back above 40. | →Stable |
| CounterA 629% conversion ratio on a near-zero net income base can be an artifact of a small denominator rather than a genuinely strong cash business. | ||
Rapid7 has beaten consensus EPS estimates in all four of its last four quarters, averaging a surprise of about 20%. Earnings | The beat streak should continue through the next reported quarter on 2026-08-06. | →Stable |
| CounterEstimates have been trending down about 12% over the past 30 days, which lowers the bar and makes future beats less meaningful. | ||
Analyst estimates for Rapid7 have fallen roughly 12% over the past 30 days, and the stock already trades below its analyst price target with essentially no remaining calculated upside. Catalyst breakdown | Estimate revisions should stabilize and turn flat-to-positive over the next two quarters. | →Stable |
| CounterFalling estimates could simply reflect the same conservative-guidance dynamic behind the beat streak rather than a genuine deterioration in the business. | ||
Rapid7 trades below its 200-day moving average with the average sloping down 14.5% over 30 days, and its risk-adjusted asymmetry ratio is negative at -1.96, implying more downside (15%) than upside (-29.3%) from here. Warnings | The asymmetry ratio should turn positive as either price falls to a better entry point or estimates stabilize. | →Stable |
| CounterA momentum-driven overbought bounce with RSI at 78 could persist longer than the downtrend thesis assumes. | ||
Rapid7 converts net income into free cash flow at 629%, even though it has no competitive moat and a failing Rule of 40 score of 16.
→StableQuality breakdown
- Expectation
- FCF-to-net-income conversion should stay well above 200% even as the combined growth-plus-margin measure climbs back above 40.
CounterA 629% conversion ratio on a near-zero net income base can be an artifact of a small denominator rather than a genuinely strong cash business.
Rapid7 has beaten consensus EPS estimates in all four of its last four quarters, averaging a surprise of about 20%.
→StableEarnings
- Expectation
- The beat streak should continue through the next reported quarter on 2026-08-06.
CounterEstimates have been trending down about 12% over the past 30 days, which lowers the bar and makes future beats less meaningful.
Analyst estimates for Rapid7 have fallen roughly 12% over the past 30 days, and the stock already trades below its analyst price target with essentially no remaining calculated upside.
→StableCatalyst breakdown
- Expectation
- Estimate revisions should stabilize and turn flat-to-positive over the next two quarters.
CounterFalling estimates could simply reflect the same conservative-guidance dynamic behind the beat streak rather than a genuine deterioration in the business.
Rapid7 trades below its 200-day moving average with the average sloping down 14.5% over 30 days, and its risk-adjusted asymmetry ratio is negative at -1.96, implying more downside (15%) than upside (-29.3%) from here.
→StableWarnings
- Expectation
- The asymmetry ratio should turn positive as either price falls to a better entry point or estimates stabilize.
CounterA momentum-driven overbought bounce with RSI at 78 could persist longer than the downtrend thesis assumes.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Rapid7's perfect earnings beat streak and strong cash conversion are increasingly offset by falling analyst estimates, a confirmed price downtrend, and a negative risk-adjusted asymmetry ratio, consistent with a call to consider reducing the position.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 6.6 |
| ROA | 0.3 |
| Gross margin | 9.9 |
| Op margin | 0.0 |
| Net margin | 1.3 |
| Current ratio | 3.1 |
| FCF quality | 10.0 |
| Moat | 5.1 |
| Rule of 40 | 3.0 |
| Piotroski F | 4.4 |
- ▸Excellent cash conversion: 629% FCF/NI
- ▸No competitive moat
- ▸Rule of 40: 16 (fail)
Growth
1.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.4 |
| EPS growth | 0.0 |
- ▸Declining revenue: -0%
Momentum
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 2.1 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 0.0 |
- ▸Overbought bear rally (RSI 83)
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -14.3%/30d — confirmed downtrend
Sentiment
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 1.4 |
| erm sentiment | 4.9 |
- ▸Below analyst target
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider selling — $5,251 (0.001% of mkt cap)
Peer rank
3.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.1 |
| quality rank | 4.9 |
| growth rank | 0.7 |
Technical
0.1/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.4 |
| 52w position | 0.0 |
Risk (lower is worse)
3.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 3.9 |
| days to cover | 7.1 |
| volatility | 0.0 |
| put call | 10.0 |
| implied vol | 0.0 |
| max pain risk | 3.0 |
| beta | 6.9 |
| debt equity | 0.0 |
- ▸High IV: 94%
- ▸Above max pain $1
Catalyst
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 3.5 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.6>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:32d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-2.5=NEGATIVE
Warning (2)
- DEATH_CROSS:momentum=5.6>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-2.51
Upside
-37.7%
Downside
15.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 83
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Drawdown -59% (>40% off 52w high)
Investment implication
The F-path SELL output reflects an overall score of 2.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Catalyst at 7.1) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-2.5=NEGATIVE) reinforce the read. Current asymmetry R:R is -2.51 — supplementary context, not the trigger for this path.
The strongest dimensions are Catalyst at 7.1, Value at 6.8, and Momentum at 5.6; the weakest are Technical at 0.1, Growth at 1.2, and Peer rank at 3.2. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of -2.51 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Perfect Earnings Beat Streak
Trip ifRapid7 reports an earnings surprise below 0% (a miss) in the next reported quarter.
- P2Falling Analyst Estimates
Trip ifAnalyst estimate revisions fall more than 20% over a rolling 30-day window.
- P3Excellent Cash Conversion Despite Quality Gaps
Trip ifFCF-to-net-income conversion falls below 200% in a subsequent quarter.
- P4Confirmed Downtrend And Negative Asymmetry
Trip ifThe risk-adjusted asymmetry ratio stays below -1 for 2 consecutive quarters.