The PolyNovo Ltd (ASX: PNV) share price has been a strong performer in 2022.
Since the start of the year, the medical device company's shares have charged 30% higher.
This compares favourably to the ASX 200 index, which is down 3% year to date.
Where next for the PolyNovo share price?
The good news is that one leading broker believes the PolyNovo share price is heading even higher from here.
According to a note out of Bell Potter, its analysts have retained their buy rating and increased their price target on its shares to $2.30.
Based on the latest PolyNovo share price of $2.03, this implies potential upside of 13.3% for investors over the next 12 months.
What did the broker say?
Bell Potter was pleased with PolyNovo's decision to raise capital last week as it "significantly strengthens" its balance sheet. The broker expects this to support the company's global growth plans. The broker explained:
The $30m placement conducted last week significantly strengthens the Polynovo balance sheet. This provides the growth platform facilitating the expansion of the US and global sales team with key markets in Asia (India, Hong Kong, China, Japan) & Canada being targeted.
Its analysts are expecting this to underpin revenue of $67.2 million in FY 2023, $97.1 million in FY 2024, and $131.9 million in FY 2025.
Bell Potter also explained that it has changed its valuation method now the company is on course to reach profitability. This resulted in an increase in its price target. It concludes:
Our price target is now generated purely from our DCF methodology as this best captures the longer-term earning potential for PNV. The strengthened balance sheet reduces financial risk and accordingly we decrease the WACC from 10.3% to 10.0%. Combining these strategic developments, we expect PNV to be profitable from FY24 in line with company expectations and this growth strategy to translate to improved earnings in the medium- to long-term (FY26 onwards).
