Orchid Island Capital, Inc. (NYSE:ORC) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. With the latest financial year loss of US$39m and a trailing-twelve-month loss of US$23m, the US$532m market-cap company alleviated its loss by moving closer towards its target of breakeven. The most pressing concern for investors is Orchid Island Capital's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

According to the 4 industry analysts covering Orchid Island Capital, the consensus is that breakeven is near. They expect the company to post a final loss in 2023, before turning a profit of US$6.5m in 2024. Therefore, the company is expected to breakeven roughly a year from now or less! We calculated the rate at which the company must grow to meet the consensus forecasts predicting breakeven within 12 months. It turns out an average annual growth rate of 126% is expected, which is rather optimistic! 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 Orchid Island Capital's upcoming projects, but, bear in mind that generally 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. Typically, debt shouldn't exceed 40% of your equity, which in this case, the company has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in 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 put together a list of relevant 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com