What is 'Net Current Asset Value Per Share - NCAVPS'

Net current asset value per share (NCAVPS) is a measure created by Benjamin Graham as one means of gauging the attractiveness of a stock. A key metric for value investors, NCAVPS is calculated by taking a company's current assets and subtracting total liabilities. Graham considered preferred stock to be a liability, so these are also subtracted. This is then divided by the number of shares outstanding. NCAV is similar to working capital, but instead of subtracting current liabilities from current assets, total liabilities and preferred stock are subtracted.

NCAVPS = Current Assets- (Total Liabilities + Preferred Stock)
# Shares Outstanding

BREAKING DOWN 'Net Current Asset Value Per Share - NCAVPS'

Examining industrial companies, Graham noted that investors typically ignore asset values and focus instead on earnings. But Graham believed that by comparing the net current asset value per share (NCAVPS) with the share price, investors could find bargains.

Essentially, NCAV is a company's liquidation value. So a stock that is trading below NCAVPS is allowing an investor to buy a company at less than the value of its current assets. And as long as the company has reasonable prospects, investors are likely to receive substantially more than they pay for. According to Graham, investors will benefit greatly if they invest in companies where the stock prices are no more than 67% of their NCAV per share. And, in fact, a study done by the State University of New York showed that from the period of 1970 to 1983 an investor could have earned an average return of 29.4%, by purchasing stocks that fulfilled Graham's requirement and holding them for one year.

However, Graham made it clear that not all stocks chosen in this manner would have strong returns, and that investors should also diversify their holdings when using this strategy. Graham recommended holding at least 30 stocks.

  1. Graham Number

    The Graham number is the upper bound of the price range that ...
  2. Benjamin Graham

    Benjamin Graham was an influential investor who is regarded as ...
  3. Benjamin Method

    The investment approach that aims to follow the strategies implemented ...
  4. Long-Term Growth (LTG)

    Long-term growth (LTG) is an investing strategy and concept in ...
  5. Mr. Market

    Mr. Market is an imaginary investor devised by Benjamin Graham ...
  6. Investment Strategy

    Investment strategy is what guides an investor's decisions based ...
Related Articles
  1. Investing

    Benjamin Graham's 3 Most Timeless Investment Principles

    Investor Benjamin Graham pioneered cutting edge concepts that propelled other top investors to fame. Find out what are his three main investment principles.
  2. Managing Wealth

    Benjamin Graham: The intelligent investor

    Benjamin Graham, while best known as Warren Buffett's mentor, was a legendary investor in his own right. Learn more about his story.
  3. Investing

    Ben Graham on Interpreting Financial Statements

    Seven pieces of advice from Benjamin Graham on understanding financial statements.
  4. Investing

    Take On Risk With A Margin of Safety

    More common risk theories can lead to missed opportunities. Find out how margin of safety can propel your portfolio.
  5. Investing

    Top 5 all-time best mutual fund managers

    The best managers produced long-term, market-beating returns and helped investors build big nest eggs. Find out who made the cut.
  6. Investing

    How Value Investors’ Patience Has Been Tested

    Investors in value stocks are finding their patience tested. Does this strategy still work?
  7. Investing

    What is Net Worth?

    Net worth is the amount by which assets exceed liabilities. Another way to say this is, it's the value of everything you own, minus all your debts.
  1. How did Warren Buffett get started in business?

    Warren Buffett may have been born with business in his blood, but it was a brush with Benjamin Graham that put him on his ... Read Answer >>
  2. Is the banking sector a good choice for value investing?

    Find out why the banking sector is attractive to value investors who typically look to buy discounted stocks during times ... Read Answer >>
  3. How do you calculate working capital?

    The formula for calculating working capital is straightforward, but lends great insight into the short-term financial health ... Read Answer >>
  4. 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 >>
Trading Center