Rapid7: A New leader in Cybersecurity?

04/15/2019 5:00 am EST

Focus: TECHNOLOGY

Timothy Lutts

Publisher, Cabot Heritage Corporation

Cybersecurity is one of the leading sectors of this new bull market, but the best performers in that space have been lesser-known names that are built from the ground up for the new age of threats, suggests Timothy Lutts, growth stock expert and editor of Cabot Stock of the Week.

Rapid7, Inc. (RPD) looks like one that’s well-positioned to thrive as corporations look to ensure that their data is seen only by people who are authorized to see it.

The company’s popularity stems from its Insight platform, which, at its core, allows clients to easily unify their data from across their various systems and IT infrastructure and then detect attackers, manage risk, secure applications, automate a variety of security checks and actions and even leverage experts (consulting services) if need be.

It sounds relatively simply — and it is — and it’s led to excellent and steady growth. All told, the company thinks it’s now playing in a $22 billion (and growing) market, and its Insight platform is helping Rapid7 grab an increasing chunk of it. Indeed, the firm’s offering has impressed enough for it to have more than 80 platform integrations with data collaboration, data workflow and data ingestion partners.

All of that has helped Rapid7’s more than 7,800 customers, including many big, recognizable names. And those customers are both sticking around (88% to 90% renewal rates each of the past eight quarters) and adding more products (same-customer revenue growth north of 20% every quarter).

Encouragingly, customers that came onboard five years ago are now spending 3.6 times as much as they did in their first year — a trend seen across all cohorts through recent years. Even better (especially for investors) is that all these customers contribute to the firm’s rapidly expanding cache of recurring revenue.

The firm’s key metric is what it calls its annualized recurring revenue, and it’s been skyrocketing of late, up 53% for all of 2018 and management has guided that figure up more than 30% in 2019, which is likely conservative; overall revenues are expected to rise 26% this year, while earnings nose into the black.

All told, it looks like Rapid7 has the products geared for a world where big companies are looking for easy, flexible ways to secure assets across their IT networks. The story, numbers and chart all point to good things going forward; simply put, Rapid7 looks like a new leader in the cybersecurity arena.

This is a high-risk situation, and volatility is to be expected, but there is great growth ahead for investors who can tolerate the action.

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