Net Asset Value NAV (Stocks)

The term “net asset value” or “NAV” is an indicator which is used in connection with stocks and investment funds.

When used in relation to stocks (shares), an NAV defines a share’s intrinsic value. The NAV is found by dividing the issuing company’s capital and reserves by the number of shares in circulation.

Example: A company’s capital is valued at 50 million Swiss francs. Its reserves are valued at 10 million francs. The company has 20,000 shares in circulation.

The equation CHF 60,000 / CHF 20,000 = CHF 3000 shows that the net asset value of each company share is 3000 francs.

The NAV is not to be confused with the market price of a listed stock. If the market price of a stock is higher than its NAV, the stock may be overvalued. If a stock’s market price is lower than its NAV, then it may be undervalued.

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