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.