PolyNovo Limited (ASX:PNV), might not be a large cap stock, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$4.01 and falling to the lows of AU$2.47. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether PolyNovo's current trading price of AU$2.50 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PolyNovo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for PolyNovo
What's the opportunity in PolyNovo?
The stock is currently trading at AU$2.50 on the share market, which means it is overvalued by 35% compared to my intrinsic value of A$1.86. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that PolyNovo’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of PolyNovo look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. PolyNovo's earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in PNV’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe PNV should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on PNV for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for PNV, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for PolyNovo and you'll want to know about these.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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About ASX:PNV
PolyNovo
Designs, manufactures, and sells biodegradable medical devices in the United States, Australia, New Zealand, and internationally.
High growth potential with excellent balance sheet.
