The average target price of ORC is 8.0 and suggests 12% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 8.0. This translates into 12% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 8.0. This suggests 12% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company's RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company qualifies as a real estate investment trust for federal income tax purposes. Orchid Island Capital, Inc. was incorporated in 2010 and is based in Vero Beach, Florida.

Orchid Island Capital, Inc.

Real Estate

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends monthly, which may appeal to investors valuing a regular income stream. 

ORC reported revenue of USD -2mn in the last 12 months, down 0% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 32% from FY24 to USD 0.42. Market expects EPS to reach USD -0.25 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 11ppts over six months and grown 2ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -459.0% in the last 12 months, a decline from 438.3% in FY23. 

Historically, ORC has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -1616.3%, down from -124.0% in FY23. 

In the last 12 months, the return on capital employed (RoCE) grew to 0.9%, below the peers. The consensus estimate for FY24 for RoCE is -9.4%, again behind the peers. 

Another important profitability metric, return on assets (RoA), amounted to 0.6% in the last 12 months, an increase from -0.9% in FY23. The market analysts predict that RoA will be -0.2% in FY24, again weaker than its peers. 

Orchid Island Capital, Inc. reported a return on equity (RoE) of 5.3% in the last 12 months, up from -8.3% in FY23. The market consensus projects an RoE of -1.9% in FY24, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.3 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

ORC has above average trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, bleak profitability, negligible return on capital, and inadequate interest coverage. We note low margin volatility, among the positive credit factors. 

In highly turbulent market conditions, ORC is moderately volatile. In other words, the stock will fall more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be moderate. 

In normal market circumstances, ORC is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to minimal. 

Considering past and projected metrics, the stock is moderately 'expensive' compared to its peers. Specifically, the stock is fairly valued on P/E, overvalued on EV/EBITDA, reasonably priced on P/FCF. 

Orchid Island Capital, Inc.

$ 7.04

4

Orchid Island Capital, Inc.

$ 7.04

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 7.04

About

About

About

About