Net Current Asset Value per Share Calculator
A net current asset value per share (NCAVPS) calculator provides investors with a tool to examine the financial health and valuation assessment of a company. The NCAVPS approach focuses on company liquidity in making its viability assessment and is often used by value investors as one data point in performing due diligence on a stock. Developed by Benjamin Graham, the “father of value investing” NCAVPS looks at current assets in relation to total liabilities and the number of shares outstanding to conduct this evaluation.
Who was Benjamin Graham?
Benjamin Graham (1894 – 1976) was an economist and an investor who earned a reputation for earning significant stock market returns through a value investing approach under which he would analyze a company’s liquidation value against its stock price. Graham’s belief was that any company whose stock was trading significantly below its real or ‘intrinsic’ value based on this liquidation assessment offered a good investment opportunity. Graham began teaching this investment theory at Columbia University in 1928 and authored several books (with David Dodd) on this subject. The best known of these books are Security Analysis and The Intelligent Investor, written in 1934 and 1949 respectively. Today, Graham has many disciples that practice this value investing approach, the best known of whom may be Warren Buffett.
The Net Current Asset Value per Share Calculation
The formula for NCAVPS can be written as:
Graham’s belief was that investors concentrate too much on company earnings rather than asset value and that when a stock trades below its NCAVPS, it can provide a significant buying opportunity. Specifically, Graham believed that:
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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