When Can We Expect 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. On 31 December 2023, the US$459m market-cap company posted a loss of US$39m for its most recent financial year. As path to profitability is the topic on Orchid Island Capital's investors mind, we've decided to gauge market sentiment. Below we will provide a high-level summary of the industry analysts’ expectations for the company.

View our latest analysis for Orchid Island Capital

Expectations from some of the American Mortgage REITs analysts is that Orchid Island Capital is on the verge of breakeven. They expect the company to post a final loss in 2024, before turning a profit of US$11m in 2025. So, the company is predicted to breakeven just over a year from today. 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 118%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

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We're not going to go through company-specific developments for Orchid Island Capital given that this is a high-level summary, but, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one issue worth mentioning. Orchid Island Capital currently has a 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:

There are too many aspects of Orchid Island Capital to cover in one brief article, but the key fundamentals for the company can all be found in one place – Orchid Island Capital's company page on Simply Wall St. We've also compiled a list of essential aspects you should further research:

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.