## What is Net Current Asset Value Per Share (NCAVPS)?

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

## How Does Net Current Asset Value Per Share (NCAVPS) Work?

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 Does Net Current Asset Value Per Share (NCAVPS) Matter?

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.