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Open Orphan plc's (LON:ORPH) Shift From Loss To Profit

Simply Wall St

Open Orphan plc's (LON:ORPH): Open Orphan plc operates as a clinical research organization pharmaceutical services company with a focus on virology, vaccine studies, and orphan drugs in the United Kingdom, Ireland, France, the Netherlands, Germany, and Singapore. The UK£81m market-cap company announced a latest loss of -€6.5m on 31 December 2019 for its most recent financial year result. Many investors are wondering the rate at which ORPH will turn a profit, with the big question being “when will the company breakeven?” I’ve put together a brief outline of industry analyst expectations for ORPH, its year of breakeven and its implied growth rate.

Check out our latest analysis for Open Orphan

According to the 2 industry analysts covering ORPH, the consensus is breakeven is near. They expect the company to post a final loss in 2020, before turning a profit of €6.8m in 2021. Therefore, ORPH is expected to breakeven roughly a few months from now. In order to meet this breakeven date, I calculated the rate at which ORPH must grow year-on-year. It turns out an average annual growth rate of 113% is expected, which signals high confidence from analysts. If this rate turns out to be too aggressive, ORPH may become profitable much later than analysts predict.

AIM:ORPH Past and Future Earnings June 28th 2020

Underlying developments driving ORPH’s growth isn’t the focus of this broad overview, however, take into account that generally healthcare tech companies, depending on the stage of product development, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one issue worth mentioning. ORPH currently has a relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in ORPH’s case is 60%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.

Next Steps:

This article is not intended to be a comprehensive analysis on ORPH, so if you are interested in understanding the company at a deeper level, take a look at ORPH’s company page on Simply Wall St. I’ve also put together a list of essential aspects you should further examine:

  1. Valuation: What is ORPH 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 ORPH 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 back ground.
  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.

This article by Simply Wall St is general in nature. 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.

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