Polynovo Ltd (ASX: PNV) shares were out of form on Monday and ended the day in the red.
The ASX 300 stock fell 1.5% to 90.5 cents.
This means that the medical device company's shares are now down approximately 50% since this time last year.
The good news is that Bell Potter believes this could have created a buying opportunity for investors.
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What is the broker saying?
Bell Potter was a touch disappointed with the ASX 300 stock's performance during the first half of FY 2026. It notes that its revenue and EBITDA were short of consensus expectations. The broker said:
PNV had pre released 1H26 product sales revenue of $68.2m ↑ 26% vs pcp. Total revenues $70.4m (including BARDA income $2.0m) 3% below our previous forecast of $72.6m. EBITDA $3.4m compared to consensus $6.9m (1H25 EBITDA $4.6m). Total revenues include sales of Novosorb MTX $6.2m (1H25 $2.1m).
The revenue growth rate in the US market decreased to 26% vs 30% in FY25. Products sales revenues for the half expanded by a $14m vs pcp, nevertheless the growth rate was modestly disappointing. In ex US markets revenues of $16.5m increased vs pcp but were only in line with 2H25. These markets tend to be more lumpy compared to the US, hence there remains ample scope for 2H26 growth.
Why is it bullish?
However, Bell Potter believes there are reasons to be positive. One of those reasons is that institutional investors could soon return after a major red flag was resolved. It said:
The stock has underperformed the ASX200 over LTM by ~20% despite 26% top line growth. A contributing factor has been Board governance which was a red flag to numerous institutions. We believe these matters are now resolved.
Overall, the broker sees deep value on offer with this ASX 300 stock at under $1.00. Bell Potter explains:
Looking forward, top line growth should continue at strong double digit pace, translating into meaningful earnings growth and ROE. Novosorb has a significant and sustainable cost of advantage over peers in the market for dermal substitute products. These attributes also dovetail nicely with cost focussed markets outside of the United States. On a two to three year outlook, we believe the stock is deep value under $1. The forecast implies strong earnings leverage from the sales growth which is easily justified by Novosorb being among the cheapest cost of goods on the market.
Big potential returns
According to the note, the broker has retained its buy rating on Polynovo's shares with a trimmed price target of $1.80.
Based on its current share price of 90.5 cents, this implies potential upside of approximately 100% over the next 12 months. It concludes:
We maintain our Buy rating. PT is lowered to $1.80 following downgrades to short terms earnings forecast. Stock remains attractive based on a two to three year outlook for EPS growth.
