What is an 'Asset Value Per Share'

Asset value per share has a number applications. Frequently, the term refers to the total value of a fund's investments divided by its number of shares outstanding. This type of asset value per share is more commonly referred to as "net asset value per share" or simply "net asset value" or "NAV" when liabilities are subtracted. NAV is a calculation for both open-end and closed-end funds. (Net) Asset value per share can also refer to a company's fair value minus its total liabilities, divided by its number of shares outstanding. Other applications of the measure are for variable universal life insurance policies and variable annuity contracts.

BREAKING DOWN 'Asset Value Per Share'

Asset value per share, or more precisely NAV in practice, is the price at which shares in that fund can be bought and sold. For an open-end fund (mutual fund), the asset value of portfolio securities is calculated with the closing prices of the trading day. After deducting liabilities of the fund an NAV, the price at which an investor may buy or sell, is determined. For a closed-end fund, NAV can change throughout the trading day based on the movement of the prices of the securities held by the closed-end fund. Theoretically, asset value should be the same as the sum of the individual securities, but closed-end funds typically trade at either a premium or discount to NAV. This is because their prices on an exchange are determined by supply and demand forces.

For publicly traded companies, investors can use asset value per share to compare the price of the company's stock to the underlying value of the business.Investors watch for significant differences between these two numbers to make buy or sell decisions. Suppose, for example, that a stock price for a conglomerate is $40 per share. However, a sum-of-parts valuation indicates that the company is worth $60 per share. Because the asset value, analyzed on a fair market value basis instead of historical book value, is 50% higher than the stock trading price, an investor can make money if the valuation gap closes. An asset value per share calculation is regularly performed for real estate investment trusts (REIT), whereby the income property portfolios are assessed at current market prices. A discrepancy between a REIT's NAV and its trading price could represent a trading opportunity for an investor.

Asset value per share is also close terminology for variable universal life insurance policies and variable annuity contracts. Asset value per unit or asset unit value (AUV) represents unit ownership for policyholders and annuitants, respectively.

RELATED TERMS
  1. Discount to Net Asset Value

    Discount to net asset value (NAV) is a pricing situation that ...
  2. Open-End Fund

    Open-end funds sell shares directly to investors based on their ...
  3. Closed-End Management Company

    A closed-end management company is an investment company that ...
  4. Historic Pricing

    Historic pricing is a method for calculating the value of an ...
  5. Annuity Unit

    An annuity unit is an accumulation unit for which the annuitant ...
  6. Valuation

    A valuation is the process of determining the current worth of ...
Related Articles
  1. Investing

    Closed-End vs. Open-End Funds

    Open-end products may be a safer choice than closed-end, but closed-end funds might produce a better return.
  2. Investing

    Closed-End Vs Open-End Funds

    Much like an individual’s wardrobe, many portfolios are collections of separate items. They combine stocks and bonds and other investments into one product.
  3. Investing

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  4. Investing

    Investment Value Vs. Fair Market Value: How They Differ

    Learn about the differences between an asset's investment value and its fair market value, including why many think fair market value is unrealistic.
  5. Investing

    The Difference Between ETFs and Closed-End Funds

    While ETFs and closed-end funds share similarities, they also have distinct differences.
  6. Investing

    Mutual Fund Vs ETF: Which is Right For You?

    Want to invest but don't understand the difference between investment products? Here we explain ETFs vs. Mutual Funds and which is right for you.
  7. Investing

    Does Active Value Investing Pay Off?

    Learn about a well-researched paper that explores why active value investors underperform, and how value investing might be beneficial for your portfolio.
RELATED FAQS
  1. How often are mutual fund prices updated?

    Learn how often mutual funds must report their price, or net asset value: daily for open-ended registered investment companies. Read Answer >>
  2. What is the difference between book value per common share and NAV (net asset value)?

    Understand the difference between book value per common share and net asset value, and learn how these evaluations are used ... Read Answer >>
  3. What is the difference between carrying value and fair value?

    Learn about the carrying value and fair value of assets and liabilities, what the carrying and fair value measure and the ... Read Answer >>
  4. How Are Book Value and Market Value Different?

    Book value and market value are two financial metrics used to determine the valuation of a company and whether the stock ... Read Answer >>
  5. What is the difference between book value and carrying value

    Dig deeper into the definitions of carrying value and book value, and learn to differentiate between their various financial ... Read Answer >>
Trading Center