Polynovo Ltd (ASX: PNV) shares have continued its amazing run, finishing the day up 12% and taking 2019 gains to well over 400%. Is it too late to join the party?
PolyNovo is an Australian medical device company that designs, develops, and manufactures dermal regeneration solutions using its patented NovoSorb biodegradable polymer technology. NovoSorb is a novel range of bio-resorbable polymers that can be produced in many formats such as film, fibre, foam, and coatings.
Investors have been clamouring to get their hands on shares in the medical device company and the share price has been on a fast ride upwards as a result.
The fact that PolyNovo was added to the ASX200 late last month will have created even more demand for its shares. Being outside of the ASX 200 means many fund managers would have been unable to buy shares in the company prior due to their mandate not allowing the purchase of investments that sit outside the 200 largest stocks.
Is The Current Share Price Justified?
If you ask me, the PolyNovo share price certainly can’t be justified based on conventional metrics or any historical measure of company performance. PolyNovo is yet to earn a profit and in fact reported a loss of $3.19 million last financial year.
But clearly that’s not what shares in the company are being priced off.
I think today’s share price, which values the company at $1.68 billion, is a bit rich given that revenue was just $13.9 million in FY19. Roughly speaking, this equates to a revenue multiple of 120x.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Luke has no financial interest in any companies mentioned.