Advanced Guide to Equity Net Asset Value Calculation: From Financial Statement Data to Stock Selection Practice

When investing in stocks, many people get dazzled by various technical indicators. But truly savvy investors understand that mastering the core logic of equity net asset value calculation often reveals investment opportunities overlooked by the market.

Why Focus on Equity Net Asset Value Calculation?

The importance of calculating equity net asset value (NAV) doesn’t lie in the numbers themselves being impressive, but in how it helps us understand a company’s true asset base. Simply put, NAV represents the intrinsic value per share after settling all debts.

Compared to daily stock price fluctuations, NAV acts like a ruler, allowing us to judge whether the current stock price is overvalued or undervalued. That’s why value investing masters like Warren Buffett always pay close attention to this indicator.

The Essence of NAV: The Truth About Net Assets

From an accounting perspective, the NAV per share is the company’s total equity divided evenly among all outstanding shares. The core calculation logic is:

NAV per share = Shareholders’ Equity / Number of Outstanding Shares

And shareholders’ equity (i.e., net assets) equals:

Shareholders’ Equity = Total Assets - Total Liabilities

In other words, NAV calculation reflects: if a company announced liquidation today, how much money could each shareholder theoretically receive.

Practical Formulas for NAV Calculation

In actual practice, there are two common methods of calculation:

Method 1: Direct Method