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. Value

    Value is the monetary, material or assessed worth of an asset, ...
  3. Closed-End Management Company

    A closed-end management company is an investment company that ...
  4. Investment Fund

    An investment fund is the pooled capital of investors that enables ...
  5. Liquidation Value

    Liquidation value is the total worth of a company's physical ...
  6. Book Value

    An asset's book value is equal to its carrying value on the balance ...
Related Articles
  1. Investing

    Open Your Eyes To Closed-End Funds

    Although less popular than their open-ended counterparts, these investment vehicles are worth a second look.
  2. Investing

    An Introduction to Closed-End Mutual Funds

    If you're looking to generate income for your investments, consider closed-end mutual funds.
  3. Financial Advisor

    Using Closed-End Funds To Build Your Core At A Discount

    Closed-end funds offer portfolios a chance to buy assets at discounts to intrinsic values. This is most apparent in the blue-chip stock space.
  4. Investing

    How to Calculate the Value of an ETF

    An ETF is a good way to get broad exposure without taking on specific risk, but calculating performance may be a bit tricky.
  5. Investing

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  6. Investing

    Two Discounted Energy Closed-End Funds to Watch

    Using closed-end funds to buy energy stocks could pay off for patient investors.
  7. Investing

    Trading mutual funds for beginners

    Learn the basics about mutual funds, including the types of strategies available and the different fees they may charge.
  8. Investing

    FAVFX: The Top All Cap Value Mutual Funds

    Understand the benefits of investing in value stocks across all market cap categories, and learn the best all-cap value mutual funds for 2016.
  9. Investing

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
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. How is NAV used for oil, gas, and energy investments?

    Find out how net asset value, or NAV, can be useful for evaluating mutual funds with oil, gas and energy investments or valuing ... Read Answer >>
  3. 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 >>
  4. What is the difference between carrying value and market value?

    Understand the difference between carrying value and market value. Learn when a company uses carrying value to value an asset ... Read Answer >>
  5. Is NAV the best way to assess the value of an REIT?

    Examine and understand the usefulness of net asset value as an accurate metric with which to assess the value of a REIT investment. Read Answer >>
Trading Center