Net asset value per share (NAVPS) represents the value per share of a mutual fund, an exchange-traded fund (ETF), or a closed-end fund. It’s calculated by dividing the total net asset value of the fund by the number of shares outstanding.
Key Takeaways
- NAVPS indicates the per-share value of a mutual fund, ETF, or closed-end fund.
- It is especially useful for evaluating open-end mutual funds, as shares are redeemed at their NAV.
- For closed-end funds and ETFs, market prices and NAVPS can vary.
How To Calculate Net Asset Value Per Share (NAVPS)
NAVPS is calculated by dividing the net asset value (NAV) by the number of shares outstanding. Here’s the formula for a better understanding:
Net Asset Value Per Share = (NAV) / (Shares Outstanding)
where:
NAV = Assets - Liabilities
Practical Application of NAVPS
NAVPS is particularly useful for mutual funds registered with regulatory bodies like the U.S. Securities and Exchange Commission (SEC), as shares of these funds are redeemed at their net asset value. Assets include the market value of the fund’s investments, cash and cash equivalents, receivables, and accrued income. Liabilities encompass total short-term and long-term liabilities, as well as all accrued expenses.
Example Calculation
Consider a mutual fund with:
- 7.5 million shares outstanding
- $500 million in investments
- $15 million in cash
- $1.5 million in receivables
- $250,000 in accrued income
Liabilities include:
- $20 million in short-term liabilities
- $5 million in long-term liabilities
- $35,000 of accrued operational expenses
- $15,000 of other accrued expenses
Let’s calculate the NAVPS:
Assets = $500 million + $15 million + $1.5 million + $250,000 = $516.75 million
Liabilities = $20 million + $5 million + $35,000 + $15,000 = $25.05 million
NAVPS = ($516.75 million - $25.05 million) / 7.5 million shares = $491.7 million / 7.5 million shares = $65.56
Differentiating NAVPS and Market Price
For mutual funds, the NAVPS is the price at which shares are bought and sold at the end of the trading day. ETFs and closed-end funds trade like stocks throughout the day, which means their NAVPS can differ from market prices due to market dynamics.
Limitations of NAVPS
In corporate financial statements, NAVPS (or book value per share) is typically below the market price per share. Reasons include the historical cost accounting principle and the supply-demand dynamics in the marketplace, leading to stock prices generally exceeding book value per share valuations.
Should You Invest in a High-NAVPS Fund?
A high NAVPS does not imply it is too expensive or that it will yield poor returns. Funds with both high and low NAVPS can perform well as the NAVPS merely indicates the per unit dollar value, not the performance or quality.
Frequency and Timing of NAVPS Calculation
NAVPS for mutual funds is updated daily after the U.S. stock market closes. There is no specific deadline, but it usually occurs between 4 p.m. and 6 p.m. EST.
The Bottom Line
Net asset value per share (NAVPS), also known as book value per share, determines the per-share value of a mutual fund, ETF, or closed-end fund. Declared daily after market close, NAVPS provides essential insight into the underlying value of these investments—though actual market prices may diverge from NAVPS during trading hours.
Related Terms: Book Value Per Share, Net Asset Value, Exchange-Traded Funds, Closed-End Funds.
References
- Morningstar. “SPDR S&P 500 ETF Trust”.
