What is the difference between NAV and fair value?

NAV is based on the company's assets and liabilities today - a balance sheet perspective. Fair value is an estimate of what the company should be worth based on future earning power. For most growth companies, fair value is the more relevant measure. For investment and property companies, NAV is more central.

Why do companies sometimes trade below NAV?

A NAV discount can arise for several reasons: general market decline, sector-specific pessimism, a poor track record of capital allocation or weak communication with the market. A discount is not necessarily mispricing - it may be well-founded. Analysing the reason is crucial.

Is NAV relevant for all companies?

No. For a services company, software company or consumer brand, NAV is of limited relevance because much of the company's value lies in intangible assets, brand and future cash flows. For investment and property companies it is central.

How is NAV per share calculated?

NAV per share is the company's total assets minus total liabilities divided by the number of outstanding shares. For investment companies this means the market value of holdings minus any liabilities, divided by the number of shares.

Glossary

Net asset value

The value of a company's underlying assets minus its liabilities. Primarily used when analysing investment companies and asset-heavy businesses.

What it is

What the company owns, not what it earns

Net asset value (NAV) is the sum of a company's assets minus its liabilities. It is a balance-sheet approach to valuation, as opposed to income-based methods like P/E or DCF. The concept is central to the analysis of investment companies, property companies and holding companies, where the assets themselves are the core of the value. A share can trade at a NAV discount (below NAV) or at a NAV premium (above NAV) depending on the market's view of management quality and portfolio composition.

Investment companies: For companies like Investor, Industrivärden and Latour, NAV is the primary valuation measure. It represents the market value of their holdings minus any liabilities.
Property companies: Property companies are often valued on the value of their property portfolio. NAV per share, sometimes called EPRA NTA, is a key metric in the sector.
NAV discount: When a share trades below NAV it may signal a buying opportunity. Or a well-deserved discount for poor capital allocation. Analysing the reason is crucial.

In practice

NAV as a floor, not a ceiling

NAV is one of several tools in analysis. It is rarely the primary measure for growth-oriented quality companies, since their value lies in future cash flows rather than historical assets. But for investment companies, NAV and the NAV discount are central factors. A twenty-percent discount in a well-managed investment company can be an attractive entry price.

“We separate the company from the stock.”

Amos Fonder

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Common questions about net asset value

Related concepts

Glossary

Fundamental Analysis

The method of analysing a company's financials, business model, and competitive position to assess its true value. The foundation of conviction-based active management.

ISK (Investment Savings Account)

The most common account type for fund savers in Sweden. You pay a flat-rate tax based on the account's value rather than capital gains tax on every sale.

Dividend

The portion of a company's profit paid out to shareholders. A dividend can be a sign of financial strength, but it is never the only thing to consider.

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