Investors in Rapid7, Inc. (NASDAQ:RPD) had a good week, as its shares rose 2.9% to close at US$36.77 following the release of its quarterly results. It looks like a credible result overall - although revenues of US$208m were what the analysts expected, Rapid7 surprised by delivering a (statutory) profit of US$0.11 per share, an impressive 68% above what was forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

Check out our latest analysis for Rapid7

After the latest results, the 23 analysts covering Rapid7 are now predicting revenues of US$835.4m in 2024. If met, this would reflect a credible 2.2% improvement in revenue compared to the last 12 months. Earnings are expected to improve, with Rapid7 forecast to report a statutory profit of US$0.37 per share. Before this earnings report, the analysts had been forecasting revenues of US$835.2m and earnings per share (EPS) of US$0.39 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share numbers for next year.

The average price target fell 7.6% to US$44.68, with reduced earnings forecasts clearly tied to a lower valuation estimate. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Rapid7 at US$59.00 per share, while the most bearish prices it at US$32.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Rapid7's revenue growth is expected to slow, with the forecast 4.5% annualised growth rate until the end of 2024 being well below the historical 21% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. Factoring in the forecast slowdown in growth, it seems obvious that Rapid7 is also expected to grow slower than other industry participants.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Rapid7. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Rapid7's revenue is expected to perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Rapid7's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Rapid7 going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 3 warning signs for Rapid7 (1 shouldn't be ignored!) that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.