Analysts Are Optimistic We'll See A Profit From Orchid Island Capital, Inc. (NYSE:ORC)

We feel now is a pretty good time to analyse Orchid Island Capital, Inc.'s (NYSE:ORC) business as it appears the company may be on the cusp of a considerable accomplishment. Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The US$640m market-cap company posted a loss in its most recent financial year of US$39m and a latest trailing-twelve-month loss of US$38m shrinking the gap between loss and breakeven. Many investors are wondering about the rate at which Orchid Island Capital will turn a profit, with the big question being “when will the company breakeven?” We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

Check out our latest analysis for Orchid Island Capital

According to the 3 industry analysts covering Orchid Island Capital, the consensus is that breakeven is near. They anticipate the company to incur a final loss in 2023, before generating positive profits of US$16m in 2024. The company is therefore projected to breakeven around a year from now or less! At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 117%, which is rather optimistic! Should the business grow at a slower rate, it will become profitable at a later date than expected.

We're not going to go through company-specific developments for Orchid Island Capital given that this is a high-level summary, but, take into account that by and large a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.

One thing we would like to bring into light with Orchid Island Capital is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on Orchid Island Capital, so if you are interested in understanding the company at a deeper level, take a look at Orchid Island Capital's company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:

1. Historical Track Record: What has Orchid Island Capital's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Orchid Island Capital'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.