Net Asset Value Per Share

Investing and Markets 📈
1

I’m trying to learn more about interpreting company financials.

I read recently that the NAVPS of one of my stocks (investment trust) is likely to be particularly adversely impacted by the increase in Corporation Tax introduced by the recent budget. That prompted me to investigate further, but I’m struggling to find anything online that explains whether or not an NAVPS lower than the stock’s share price is a good thing or a bad thing (I assume its an appropriate comparison?).

Can anyone shed light on this please?
Some numbers below:

Market capitalisation £2,4 million
Share price 134.2 pence
GAV £3,329.9 million
NAV £2,229.9 million
NAV per share 122.2 pence
Total return (NAV) 6.5 per cent
Premium to NAV 9.8 per cent

2

as a rule of thumb if the NAVPS is higher than the share price you’re buying at a discount and if the NAVPS is lower than the share price you’re buying at a premium

3

Thanks Raul,

So in the example quoted (based purely on the NAVPS) the current share price is looking expensive - is that correct?

4

It looks that way.

But I think that information alone is insufficient to make a decision. We never know what future price movements will be

5

Agreed. In this particular case there was a recent share placement which may have contributed to a reduction in NAVPS. However, the purpose of the placement is to fund acquitisitions for 2021 - which I guess should (hopefully) increase NAPVS and (hopefully) will prove to be beneficial.

6

can you figure out the value of the target company (the one being acquired) and compare it to the price tag to find out if they are overpaying or buying at a discount?

7

Good point!

I feel like I’ve just been set some homework :rofl:

8

nah… it’s just part of playing the game