Net Current Asset Value Per Share (NCAVPS)

Net Current Asset Value Per Share (NCAVPS) is a value-investing metric introduced by Benjamin Graham to identify deeply undervalued stocks. It estimates the per-share liquidation value of a company by focusing on current, tangible assets and subtracting all liabilities.

Formula

NCAVPS = (Current Assets − (Total Liabilities + Preferred Stock)) ÷ Shares Outstanding

Note: Graham treated preferred stock as a liability. NCAV differs from working capital because it subtracts total liabilities (not only current liabilities).

What it measures

• NCAV approximates the liquidation value derived from a company’s physical, short-term assets (cash, receivables, inventory).
• It excludes intangible assets such as goodwill, patents, and brand value.
• If a stock trades below its NCAVPS, an investor is theoretically paying less than the company’s net current asset value per share.

Why investors use NCAVPS

• Value investors use NCAVPS to find companies selling for less than their net current assets—potential “bargains” if the business has reasonable prospects.
• Graham believed comparing market price to NCAVPS reveals situations where downside is limited and upside exists if the company’s assets are realized or its operations improve.

Practical guideline (Graham)

Graham suggested buying stocks whose market price is no more than about 67% of NCAVPS. He also advised diversification—holding a large number of such stocks (he recommended around 30) to spread risk, since not all will perform well.

Example

If a company has:
– Current assets = $10,000,000
– Total liabilities = $6,000,000
– Preferred stock = $0
– Shares outstanding = 1,000,000

NCAVPS = ($10,000,000 − $6,000,000) ÷ 1,000,000 = $4.00 per share.
According to Graham’s rule, a buy candidate would have a market price ≤ $2.68 (≈ 67% of $4.00).

Limitations and considerations

• NCAVPS favors firms with sizeable liquid assets relative to liabilities and may screen in distressed or shrinking businesses.
• It ignores intangible value, future earnings potential, and off-balance-sheet items.
• Market reasons for low price (e.g., fraud, deteriorating demand, legal risks) may not be reflected in the balance sheet.
• Use NCAVPS as one tool among others—combine with qualitative analysis, cash-flow assessment, and diversification.

Bottom line

NCAVPS is a conservative, balance-sheet–focused metric for spotting potentially undervalued stocks by comparing market price to net current asset value per share. When applied with other analyses and proper diversification, it can help investors identify investments with limited downside and possible upside if asset values are realized or operations recover.