Polynovo Ltd (ASX: PNV) shares have been well and truly out of form this year.
Since the turn of the year, the ASX 200 share has lost almost 40% of its value.
This has been driven by a combination of broad market weakness, the exit of its CEO, and the release of the medical device company's half year results.
While this is disappointing, the team at Bell Potter thinks that an "outstanding entry point for long term growth oriented investors."
What is the broker saying about this ASX 200 share?
While some investors have responded negatively to the exit of PolyNovo's CEO, Bell Potter sees positives from the change of leadership. It explains:
The recent departure of CEO Swami Raote was unfortunate but not unusual for a small company experiencing high growth. A key diver of PNV's premium valuation has been the largely self-funding nature of this growth, particularly in the years following the IPO. PNV did raise capital in FY23 to support its growth, nevertheless, the company has always acted responsibly with regard to management of overheads and headcount in order to maintain this mostly internally funded growth.
Prior to joining PNV, Mr Raote's career had been in the US and with a large pharma group with a vast budget. We expect the change of culture to the smaller organisation with less separation between ownership and management was the underlying source of the fall out with the PNV Board. PNV remains well funded and we expect will generate a modest cash surplus from operations in 2H25 in addition to continuing earnings.
Strong growth outlook
The main reason that Bell Potter is bullish on this ASX 200 share is its strong growth outlook.
Bell Potter believes that the company is well-placed for ongoing double digit growth. It explains:
PNV remains an emerging growth company with excellent prospects for ongoing double digit growth in the US and ROW markets. The US sales force will continue to be led by Ed Graubart (President, North America) as has been the case for the last 5 years. Short term catalysts in the US include the pending approvals for MTX Thick and the PMA for Novosorb. The US sales force remains at 85 heads relative to US revenues of c. US$53m in FY25, hence the average revenue per rep remains well below US$1m. In other words new product is imminent accompanied by management infrastructure, sales force and balance sheet to support ongoing growth.
Big return potential
The note reveals that Bell Potter has reaffirmed its buy rating and $2.80 price target on the ASX 200 share.
Based on its current share price of $1.27, this implies potential upside of 120% for investors over the next 12 months. It concludes:
To put that into context, a $2,000 investment in PolyNovo shares would turn into $4,400 by this time next year if Bell Potter is on the money with its recommendation.
Time will tell if that is the case.
