# Net Current Asset Value Per Share (NCAVPS)

## What it is:

The net current asset value per share (NCAVPS) equals a company's current assets divided by its number of shares outstanding.

## How it works (Example):

The formula for NCAVPS is:

NCAVPS = (Current Assets - Current Liabilities) / Shares Outstanding

A current asset is cash or an asset that can be converted to cash within one year. A current liability is a liability that is due within one year.

For example, let's assume that Company XYZ has \$10 million in current assets (as listed on the balance sheet), \$4 million in current liabilities (also listed on the balance sheet), and 1 million shares outstanding. According to the formula, Company XYZ's NCAVPS is:

NCAVPS = (\$10,000,000 - \$4,000,000) / 1,000,000 = \$6

The famous investor Benjamin Graham, author of The Intelligent Investor and mentor to Warren Buffett, made NCAVPS famous via his rule that he would only buy a stock if it were trading for less than 66% of its NCAVPS. However, note that his formula for NCAVPS uses total liabilities rather than current liabilities, and typically results in a smaller number. Here is the alternative formula for NCAVPS:

NCAVPS = (Current Assets - Total Liabilities) / Shares Outstanding

## Why it Matters:

Formula variations aside, Graham's contention was that investors tend to ignore asset value in favor of earnings. When stocks trade below a company's NCAVPS, they are essentially trading below the company's liquidation value and are the ultimate bargain.