Net Asset Value Per Share (NAVPS): Definition, Formula, Uses

What Is Net Asset Value Per Share – NAVPS?

Net asset value per share (NAVPS) is an expression for net asset value that represents the value per share of a mutual fund, an exchange-traded fund (ETF), or a closed-end fund. It is calculated by dividing the total net asset value of the fund or company by the number of shares outstanding. It is also known as book value per share.

Key Takeaways

• NAVPS represents the value per share of a mutual fund, ETF, or closed-end fund.
• It is often used in relation to open-end mutual funds since shares are redeemed at their NAV.
• Market price and NAVPS, however, may vary for closed-end funds and ETFs.

How To Calculate Net Asset Value Per Share – NAVPS

Net asset value per share (NAVPS) is calculated by dividing the net asset value by the number of shares outstanding.

The formula to calculate NAVPS is:

\begin{aligned} &\text{Net Asset Value Per Share} = \frac{ \text{NAV} }{ \text{Shares Outstanding} }\\ &\textbf{where:} \\ &\text{NAV} = \text{Assets} - \text{Liabilities} \\ \end{aligned}

How NAVPS Is Used

The net asset value per share (NAVPS) is often used in relation to open-end or mutual funds since shares of such funds registered with the U.S. Securities and Exchange Commission (SEC) are redeemed at their net asset value.

Referring to the formula for net asset value per share (NAVPS) above, assets include the total market value of the fund's investments, cash and cash equivalents, receivables, and accrued income. Liabilities equal total short-term and long-term liabilities, plus all accrued expenses, such as staff salaries, utilities, and other operational expenses. The total number of expenses may be substantial because management expenses, distribution and marketing expenses, transfer agent fees, custodian, and audit fees may all be included.

Example of How To Use Net Asset Value Per Share – NAVPS

Consider a mutual fund with 7.5 million shares outstanding that has $500 million in investments,$15 million in cash, $1.5 million in receivables, and$250,000 in accrued income. As for liabilities, the fund has $20 million in short-term liabilities and$5 million in long-term liabilities. The fund has $35,000 of accrued operational expenses and$15,000 of other accrued expenses. The assets, liabilities and NAVPS are calculated as:

\begin{aligned} \text{Assets} =& \ \500,000,000 + \15,000,000 + \1,500,000 \\ \phantom{\text{Assets =}} &+ \ \250,000 = \516,750,000 \\ \text{Liabilities} =& \ \20,000,000 + \5,000,000 + \35,000 \\ \phantom{\text{Liabilities} =} &+ \ \15,000 = \25,050,000 \\ \text{NAVPS} =& \ \frac{ \516,750,000 - \25,050,000 }{ 7,500,000 } \\ =& \ \frac{ \491,700,000 }{ 7,500,000 } = \65.56 \\ \end{aligned}

For mutual funds and ETFs, the NAVPS is often readily available on sites like Morningstar.

As noted below, the market price and NAVPS of ETFs may differ. For example, the market price of the SPDR S&P 500 ETF is $402.63 as of Aug. 29, 2022, while its NAVPS is recorded as$405.24 on Morningstar.

The Difference Between NAVPS and Market Price

For a mutual fund, the NAVPS is the price at which shares are bought and sold at the end of each trading day. Exchange-traded funds (ETFs)s and closed-end funds are different in that they trade as stocks throughout the trading day. Because these types of funds are subject to market forces, their NAVPS at any given time may diverge from the actual buying and selling prices of the funds.

The NAVPS values of ETFs and closed-end funds are calculated at the end of the trading day for reporting purposes but are updated many times per minute in real time throughout the trading day.

Limitations of Using Net Asset Value Per Share – NAVPS

In the context of corporate financial statements of publicly traded companies, the NAVPS or book value per share is usually below the market price per share. The historical cost accounting principle—which tends to understate certain asset values—and the supply and demand forces of the marketplace generally push stock prices above book value per share valuations.

For related insight, read more about the difference between an ETF’s NAVPS and market price.

Should I Invest in a Mutual Fund With a High NAVPS?

Some investors may incorrectly believe that a high NAVPS means it is too expensive and will provide a poor return on investment. However, mutual funds with both high and low NAVPS can perform well because the NAVPS is not an indicator of the performance of the fund.

The NAVPS is simply the dollar amount per unit. If you have $20,000 to invest, you could receive 200 units of a mutual fund with a NAVPS of$100 or 100 units of a mutual fund with a NAVPS of \$200.

How Often Is NAVPS Calculated?

The NAVPS values of mutual funds are updated once a day after the U.S. stock market closes. Closed-end funds do not have to update their NAVPS daily.

What Time Is NAVPS Declared?

The NAVPS values of mutual funds are declared daily after the close of the U.S. stock market at 4 p.m. Eastern Standard Time (EST). There is no set deadline when a mutual fund must update and submit its NAVPS to regulatory agencies. Typically, the NAVPS is declared between 4 p.m. and 6 p.m. EST. For more on this topic, read When Do Mutual Funds Update Their Prices?

The Bottom Line

Also known as book value per share, the net asset value per share (NAVS) is the value per share of a mutual fund, ETF, or closed-end fund. It is declared once a day after the close of the U.S. stock market, though the actual market price per share of a particular fund may be higher than its NAVS. During the trading day the actual NAVS value of a particular fund may be updated many times per minute.

Article Sources
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1. Morningstar. "SPDR S&P 500 ETF Trust." Accessed Aug. 29, 2022.