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How high will the Polynovo share price climb in 2020?

The Polynovo Ltd (ASX: PNV) share price has hit a new record high of $3.00 per share after a bumper start to the year.

Why the Polynovo share price is climbing higher

PolyNovo develops innovative medical devices including its patented bioabsorbable polymer technology Novosorb. Novosorb is a proprietary medical-grade polymer that supports tissue repair and improves blood flow.

The group’s NovoSorb Biodegradable Temporising Matrix (BTM) product has been recording sales at a record pace in recent months. Polynovo reported $2 million in monthly NovoSorb BTM sales for the first time in December 2019, which was an increase of 134% on December 2018.

The Polynovo share price has been storming higher to start the year and is the top-performing S&P/ASX 200 (INDEXASX: XJO) stock in 2020. Polynovo’s 52.28% gain is well-ahead of the 34.70% return from the next best, Afterpay Ltd (ASX: APT).

The group’s shares climbed higher again last week after CEO Paul Brennan’s recent bullish comments. Mr Brennan has flagged further aggressive growth and heavy reinvestment to drive top-line growth.

How high can the group’s shares go?

The interesting thing with the company is just how much growth is priced into the Polynovo share price.

The group’s market cap has surged to $1.98 billion amid a 328.57% gain in the last 12 months.

When a company’s CEO says they’re going all-in on aggressive growth, I think it’s worth paying attention. I think the key to long-term success for Polynovo is its continued research and development success.

Clearly the sales side of the business is going well and delivering results, but that needs to translate to returns for shareholders. Mr. Brennan pointed to the significant market opportunity that lies ahead for Polynovo.

The United States breast market is valued at $2.5 billion to $3 billion, while the hernia repair market is valued at $2 billion and growing at 7% per annum. 

If Polynovo can build a large moat, similar to CSL Limited (ASX: CSL), then the company’s share price is worth watching.

Results are key for a growth company like this and I think late February could be a great gauge of its success in 2020.

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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