What Is Net Current Asset Value Per Share?

Net current asset value per share (NCAVPS) is a measure created by Benjamin Graham as one means of gauging the attractiveness of a stock. A key metric for 澳洲幸运5开奖号码历史查询:value investors, NCAVP𝓰S is calculated by taking a 🔴company's current assets and subtracting total liabilities.

Graham considered 澳洲幸运5开奖号码历史查询:preferred stock to be a liability, so these are also subtracted. This is then divided by the number of shares outstanding. NCAV is similar to 澳洲幸运5开奖号码历史查询:working capital, but instead of subtrac🅷ting current liabilities from current assets, total liabilities and pref🧸erred stock are subtracted.

The formula for NCAVPS is:

NCAVPS = Current Assets - (Total Liabilities + Preferred Stock) ÷ Shares Outstanding

Understanding Net Current Asset Va𝐆lue Per Share (NCAVPꩲS)

Examining industrial companies, Graham noted that investors typically ignore asset values and focus instead on earnings. But Graham believed that by💙 comparing the net current asset value per share (NCAVPS) with the share price, investors could find bargains.

Essentially, net current asset value is a company's liquidation value. A company's liquidation value is the total worth of all its physical assets, such as fixtures, equipment, inventory, and real estate. It excludes 澳洲幸运5开奖号码历史查询:intangible assets, such as intellectual proper🦋ty, brand recognition, and goodwill. If a company were to go out of business and sell all i✅ts physical assets, the value of these assets would be the company's liquidation value.

So a stock that is trading below NCAVPS is allowing an investor to buy a company at less than the value of its current assets. And as long as the company has reasonable prospects, investoꦗrs are likely to receive substantially more than they pay for.

Special Considerations

In addition to NCAVPS, Graham recommended other value investing strategies for identifying undervalued stocks. One such strategy, 澳洲幸运5开奖号码历史查询:defensive stock investing, means the investor ဣwill purchase stocks that pr⛎ovide stable earnings and dividends regardless of what is going on in the overall stock market and economy.

These "defensive stocks" are especially appealing because they protect the investor during times of recession, giving the investor a cushion to weather downturns in the markets. Examples of defensive stocks can often be found in the consumer staples, utilities, and healthcare sectors. These stocks tend to do better during a recession because they are 澳洲幸运5开奖号码历史查询:non-cyclical, meaning they are noꦯt highly correlated with the bus𝄹iness and economic cycles.

The Bottom Line

According to Graham, investors will benefit greatly if they invest in companies where the stock prices are no more than 67% of their NCAV per share.

However, Graham made it clear that not all stocks chosen using the NCAVPS formula would have strong returns, and that investors should also diversify their holdings whe๊n using this strategy. Graham recomm💃ended holding at least 30 stocks.