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Net Asst Value per Share (NAV)
NAV is one of the tools to measure the share value. The calculation method is deducting the total liabilities from the total assets of the company, and then divided by total number...
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Net Asst Value per Share (NAV)
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NAV is one of the tools to measure the share value. The calculation method is deducting the total liabilities from the total assets of the company, and then divided by total number of shares. From which, the actual equity interest of shareholders proportioned to the assets of the company could be obtained.

Formula: (total assets – total liabilities) / total number of shares

For example, the total assets of the company are $100 and the total liabilities $0 with the total number of shares of 100, the NAV of the company will be $1, i.e. $1 NAV is assigned to each share. Normally speaking, the reasonable share price will be $1, barring other factors. Yet, it is not always a justifiable case where NAV equals the share price as the share price of a company is decided by market.

Quoting an example, the value or potential of a technology company is stemmed from its technology under research and development or even patents. Nonetheless, such value is unnecessarily to be fully reflected on the book. Taking Tencent for an instance, the NAV is only around $20 while the share price is far above $20. The main reason for this gap is squarely attributable to the market anticipation of some R&D or even of some newborn products which may not be fully profited will generate tremendous profit growth in the company in future. Therefore, investors are advised to garner more information before making appropriate investment choices, and not to measure the share value upon NAV alone.
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