Net asset value (Nav)

By THIS IS MONEY
Updated:

 

The Daily Mail City team explains net asset value (Nav) - a company's value, less its liabilities.

What is it?

Broadly-speaking, net asset value, or Nav, is a measure used to describe the value of a company's assets, minus the value of its liabilities.

It is often referred to as the 'book value' of a company.

It is usually divided by the number of shares in a company to give the net asset value per share.

Does Nav equal value?

No. The Nav values assets at the price at which they could be immediately sold into the market.

This differs from the equity value of a company because share prices take into account expected future increases or decreases in the value of assets.

A company which is expected to perform well would therefore have a share price higher than its NAV per share, while a struggling firm might have an Nav per share in excess of its stock price.

Is that it?

Not quite. For a property firm such as British Land, NAV is a more significant and reliable means of calculating value.

Why's that?

Property investment firms tend to have a more fixed idea of the value of their investments, because rental income is fairly predictable. The measurement, often calculated as NAV per investment unit, is therefore a pretty accurate assessment of the value of a developer based on the ongoing performance of its investments.

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