Open Orphan plc (LON:ORPH): Are Analysts Optimistic?

We feel now is a pretty good time to analyse Open Orphan plc's (LON:ORPH) business as it appears the company may be on the cusp of a considerable accomplishment. Open Orphan plc operates as a pharmaceutical service and contract research company. The UK£156m market-cap company posted a loss in its most recent financial year of UK£11m and a latest trailing-twelve-month loss of UK£3.0m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Open Orphan will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.

Check out our latest analysis for Open Orphan

Consensus from 2 of the British Life Sciences analysts is that Open Orphan is on the verge of breakeven. They anticipate the company to incur a final loss in 2021, before generating positive profits of UK£2.7m in 2022. Therefore, the company is expected to breakeven just over a year from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 185%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Open Orphan's upcoming projects, however, keep in mind that typically a life science company has lumpy cash flows which are contingent on the product and stage of development the company is in. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

One thing we’d like to point out is that The company has managed its capital prudently, with debt making up 1.5% of equity. This means that it has predominantly funded its operations from equity capital, and its low debt obligation reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Open Orphan which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Open Orphan, take a look at Open Orphan's company page on Simply Wall St. We've also compiled a list of pertinent factors you should look at:

1. Valuation: What is Open Orphan worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Open Orphan is currently mispriced by the market.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Open Orphan’s board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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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.