Why is the Polynovo share price surging 35% in 5 days?

Polynovo shares have sprouted shoots of green in recent weeks.

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A happy woman smiles as she looks at a tablet in a room with green plantlife around her. She is also wearing a green shirt representing the rising Polynovo share price

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Key points

  • Polynovo shares are up 35% in five trading days 
  • There's been no market-sensitive news out of Polynovo since early April, but there has been a number of insider purchases by its executives of late
  • In the past 12 months, the Polynovo share price has slipped by 55%

Shares in Polynovo Ltd (ASX: PNV) were 7% higher in early trading today but have since resettled at $1.16, up 2.67% despite no market-sensitive information being released by the medical device company today.

Polynovo shares have risen from the dead, having spiked in a vertical fashion by 35.1% in the past five trading days. This has potentially ended a downwards trend that began at the start of FY22 when the Polynovo shares were trading at $2.82.

The Polynovo share price has also bifurcated away from the S&P/ASX 200 Health Care Index (ASX: XHJ). Over the past five trading days, the broader index gained just 0.6%.

What’s up with the Polynovo share price?

Recently, share purchases by various insiders have made the news.

As we reported on Tuesday: “An entity owned by the company’s chair David Williams splashed out yesterday, snapping up $227,500 worth of Polynovo stock on the market. Additionally, another two of the company’s directors reported buying into its stock last week, each snapping up parcels of 100,000 shares.”

Insider purchases by executives and directors are often interpreted as a vote of confidence by the market. This might be inspiring ASX investors to bid up the Polynovo share price in recent days.

The gain comes at the expense of short-sellers who still appear to have their tentacles wrapped around the stock. Polynovo is the fifth most shorted stock on the ASX, as we reported on Monday.

What do the experts think of Polynovo?

The shift in market sentiment appears to be matched by analyst sentiment. Three out of the five analysts covering Polynovo say it’s a buy right now, according to Bloomberg data.

The teams at Evans & Partners, Macquarie, and Bell Potter say buy. They value Polynovo shares at 12-month target prices of $1.40, $1.60, and $1.50 respectively. Meanwhile, Ord Minnett and Wilsons each rate it as a hold.

Polynovo share price snapshot

In the past 12 months, the Polynovo share price has slipped by 55%.

Polynovo has a market capitalisation of $711.31 million with 661.7 million shares outstanding.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended POLYNOVO FPO. The Motley Fool Australia has recommended Macquarie Group Limited. 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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