MARK GARDNERMaqro CapitalPolynovo (ASX: PNV)Polynovo is an...

MARK GARDNER

Maqro Capital

Polynovo (ASX: PNV)

Polynovo is an Australian-based company focused on the development of medical devices based on its patented technology. Its cornerstone product, NovoSorb BTM, is used to treat wounds and aid the body in regenerating tissue.

Over the past six reporting periods, the company has tended to disappoint investors with the company disappointing on 83% of their recent annual and half-yearly reports, falling by an average of 10.2%. This has come as investors tend to get ahead of themselves with Polynovo, where they expect great things from their medical-grade polymer technology, but the company tends to not live up to these expectations.

Given the high expectations even slight misses on analyst expectations have an exaggerated impact and this typically sees Polynovo exit reporting season weaker than where it started. The set-up for the company currently is similar to that of six months ago. Since then, it has risen rapidly on little fundamental news, which essentially represents bets that the company will beat expectations.

Polynovo's share price performance heading into its FY22 report compared to its 1H23 report

While we like Polynovo from a fundamental point of view and think that it is an interesting company in an exciting space, we believe it would be prudent to reduce allocations of the company going into the reporting season due to the company’s track record of disappointing investors’ expectations. Indeed, if the company does miss expectations, that would then represent discounted price to a company which has strong long term potential.

This article was written by Maqro Capital's Head of Research Julius Zondag and equity research analyst Claire Rich.