Net Asset Value per Share Computation Technique: Net asset value per share computation is quite an important concept to discuss. As we know that fundamental analysis is a vast subject, there are many ratios, valuation, balance sheet to analyze the market fundamentally. Net asset value per share is one of them. It also refers to NAV or NAVPS as well. NAVPS has multiple uses in the stock market and mutual funds also but in both of the investment process the concept of NAV is almost the same.
NAVPS helps investors to make smart buying and selling decision in a certain way. It denotes the value or price of one share. The calculation of net value per share is quite simple and straight. In order to calculate the value assets, liabilities and the number of shares required. First of all, you need to subtract the asset from the liabilities. After that, divide the amount by the number of shares. The formula is as follows:
Net Asset Value Per Share Computation-Points to Remember
- Net asset value per share defines the value of per share.
- Though NAV is not the only tool to calculate or analyze the company’s growth and share value, certainly it helps a lot to find out the fair valuation of a share.
- Investors can compare the company’s growth level, worth of shares through net asset value.
- NAVPS estimation is one of the most significant tools in fundamental analysis.
- NAVPS provides an idea to see whether the market is optimistic or pessimistic.
Net Asset Value Per Share Computation
Let’s assume a company has 1,00,000 asset and 50,000 liabilities, and worth of total shares is 5000. Therefore, net asset value per share will be (1,00,000-50,000)=50,000 , (50,000/5000)=10 Rs.
Let’s see the chart below:
As we can see from this chart that the net asset value per share is gradually increasing every year. In the financial year 2014, the company had its highest NAV.
Limitation of Net Asset Value
There is some limitation too. Industries like media, advertisement, where the value of these company is human capital. Hence, NAV calculation is not so effective here. The exact worth of the company asset is based on the human capital.
However, NAVPS is quite important aspects of fundamental analysis. Though it’s not applicable to each and every sector, it has much importance to find out the worth of a share. So, for analyzing a company’s share price NAV is quite significant here.