Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Net Current Asset Value Per Share (NCAVPS)

What it is:

The net current asset value per share (NCAVPS) equals a company's current assets divided by its number of shares outstanding.

How it works (Example):

The formula for NCAVPS is:

NCAVPS = (Current Assets - Current Liabilities) / Shares Outstanding

A current asset is cash or an asset that can be converted to cash within one year. A current liability is a liability that is due within one year.

For example, let's assume that Company XYZ has $10 million in current assets (as listed on the balance sheet), $4 million in current liabilities (also listed on the balance sheet), and 1 million shares outstanding. According to the formula, Company XYZ's NCAVPS is:

NCAVPS = ($10,000,000 - $4,000,000) / 1,000,000 = $6

The famous investor Benjamin Graham, author of The Intelligent Investor and mentor to Warren Buffett, made NCAVPS famous via his rule that he would only buy a stock if it were trading for less than 66% of its NCAVPS. However, note that his formula for NCAVPS uses total liabilities rather than current liabilities, and typically results in a smaller number. Here is the alternative formula for NCAVPS:

NCAVPS = (Current Assets - Total Liabilities) / Shares Outstanding

Why it Matters:

Formula variations aside, Graham's contention was that investors tend to ignore asset value in favor of earnings. When stocks trade below a company's NCAVPS, they are essentially trading below the company's liquidation value and are the ultimate bargain.

[To learn more about Benjamin Graham and his investing philosophy, click here to read Benjamin Graham: The Father of Value Investing.]

Because net asset value encompasses a host of company activities, including inventory management, debt management, revenue collection, and payments to suppliers, it is important to understand that net asset value ratios vary from company to company and from industry to industry. For these reasons, NCAVPS comparisons are generally most meaningful among companies within the same industry, and the definition of a "high" or "low" ratio should be made within this context.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...