Asset Value Per Share

What Is an Asset Value Per Share?

Asset value per share has a number of applications. Much of the time, the term alludes to the total value of a fund's investments separated by its number of shares outstanding. This type of asset value per share is all the more usually alluded to as net asset value per share or just net asset value (NAV) when liabilities are deducted. NAV is a calculation for both open-end and closed-end funds. (Net) Asset value per share can likewise allude to a company's fair value minus its total liabilities, separated by its number of shares outstanding. Different applications of the measure are for variable universal life insurance policies and variable annuity contracts.

Understanding Asset Value Per Share

Asset value per share, or all the more unequivocally NAV in practice, is the price at what shares in that fund can be bought and sold.

For a open-end fund (mutual fund), the asset value of portfolio securities is calculated with the closing prices of the trading day. For a closed-end fund, NAV can change all through the trading day in view of the movement of the prices of the securities held by the closed-end fund.

Hypothetically, asset value ought to be equivalent to the sum of the individual securities, yet closed-end funds normally trade at either a premium or discount to NAV. This is on the grounds that their prices on an exchange are determined by supply and demand powers.

Types of Asset Value Per Share

For publicly traded companies, investors can utilize asset value per share to compare the price of the company's stock to the underlying value of the business. Investors watch for massive differences between these two numbers to go with buy or sell choices. Assume, for instance, that a stock price for a conglomerate is $40 per share. Notwithstanding, a sum-of-parts valuation demonstrates that the company is worth $60 per share.

Since the asset value, examined on a fair market value basis rather than historical book value, is half higher than the stock trading price, an investor can bring in money on the off chance that the valuation gap closes. An asset value for each share calculation is consistently performed for real estate investment trusts (REIT), by which the income property portfolios are assessed at current market prices. A disparity between a REIT's NAV and its trading price could address a trading opportunity for an investor.

Asset value per share is likewise a close terminology for variable universal life insurance policies and variable annuity contracts. Asset value per unit or asset unit value (AUV) addresses unit ownership for policyholders and annuitants, individually.