Rapid7, Inc. (RPD) stock intrinsic value fair value estimate & owner earnings analysis

Rapid7 sells subscription cybersecurity software, organized around its Command Platform, which combines exposure management (vulnerability and cloud security), threat detection and response, and managed services. About 71% of 2025 revenue of $859.8 million came from the United States and 29% from the rest of the world. What the numbers show. Growth has stalled. Annualized recurring revenue was $839.9 million at the end of 2025, essentially unchanged from $839.8 million a year earlier, and the customer count slipped from 11,727 to 11,674. Revenue rose only 1.9% in 2025 after 8.5% in 2024, and revenue for the first half of 2026 was $420.6 million against $424.4 million a year earlier. The company is profitable on cash: operating cash flow was $153.8 million in 2025. But stock-based compensation, at $104.3 million, consumes most of it. We count that as a real cost, and we also strip out swings from working capital (mainly changes in deferred revenue and prepaid commissions) and separate the capital spending needed to keep the business running from spending on growth. On that basis owner earnings were about $0.93 per share in 2024 and $0.64 in 2025; 2023 was negative (about -$0.41) and the years before that were more deeply negative, when the company was growing quickly and paying heavily in stock. We treat the business as it exists since the 2023 restructuring, so our starting level is the midpoint of 2024 and 2025, about $0.78 per share. Intangible amortization ($35.7 million in 2025) is added back as a non-cash charge; because the business is not growing, we do not credit any growth on top of it. Growth check. Owner earnings per share fell about 31% in 2025. Our base case assumes a 2% decline in 2026, which is a milder path than that fall. The reason is that the level is holding in the first half of 2026: operating cash flow was $76.8 million against $77.3 million a year earlier, while stock-based compensation dropped to $39.7 million from $54.7 million. Two quarters is thin evidence, so we did not raise the starting level in the base case. The key dated fact is debt. Rapid7 has $600 million of 0.25% convertible notes due March 15, 2027 and $300 million of 1.25% notes due March 15, 2029. At year-end 2025 it held about $658.8 million of cash and investments and earned $23.0 million of interest income in 2025, which is included in operating cash flow. Repaying the 2027 notes from cash would remove roughly $21 million a year of that interest income, about $0.32 per share, from 2027 on. We include that in every case, and we do not subtract debt or add cash separately, because the effect is already in the earnings stream. Base case, about $5.1 per share. Owner earnings drift down 2% a year from a $0.78 starting level (about $0.76 in 2026), drop by the lost interest income in 2027 (to about $0.43), and keep shrinking 2% a year through 2035 and 5% a year after that. We credit no growth: renewals of an $840 million recurring base are what the evidence supports, but flat annual recurring revenue and slipping customer counts give no proven, repeatable growth to include. We left out new products, platform consolidation and margin expansion because none is yet visible in the numbers. Bear case, about $1.6 per share. Owner earnings start near $0.58 in 2026 (roughly the 2025 level less another 10%), then shrink 8% a year as customer count and revenue keep eroding, with the 2027 note repayment removing the $0.32 of interest income. The story ends after 2035 with no value beyond. The conclusion is that a leveraged, slower-growing subscription business could see cash generation compress sharply; if losses were larger than this, the $900 million of notes could weigh more heavily than we show. Bull case, about $11.4 per share. Stock-based compensation, which fell about 27% in the first half of 2026, stays near $80 million a year rather than $104 million, lifting the starting level to about $1.15 per share. Revenue holds flat with no credited growth, the 2027 interest-income loss applies, and earnings hold at about $0.83 for a decade before fading 3% a year. What would make this wrong. Upside: recurring revenue returning to growth, or stock compensation falling further than we assume. Downside: faster customer losses, or the 2027 notes being refinanced at market rates instead of repaid from cash. One item we could not reconcile from the filings: the 2029 notes may be repaid from future cash build, and we did not model any additional interest income lost from that repayment. The margin-of-safety price of $2.80 sits well below the base value because earnings are shrinking, the balance sheet carries a $600 million maturity in 2027, and the bear case sits at roughly half the margin-of-safety price's distance from base.