A company’s net asset value, or NAV, is a good place to start. However, it’s not the only way to measure a company’s worth. If you want to know how much a company is worth, you’ll have to dig deeper. The company’s total assets are divided by its total liabilities. When you divide the total amount by the number of shares you own, you have the monetary equivalent. This can be handy if you’re looking to sell off your stake in a merger or acquisition.
Another good NAV benchmark is the price per share. While you’re at it, you might also want to consider the price per unit, or p/u. Getting more units may not always translate to higher returns. For instance, you could end up with fewer units, but a higher p/u.
Having a solid understanding of NAV is the best way to avoid a costly merger or acquisition. That said, you need to be careful. Investing in the wrong company can be the biggest bummer of all. Luckily, there are companies whose products and services will protect you from the bad guys. Some of these companies offer a multi-year service contract. They also come with the support of an expert. Whether you’re an individual investor or a large institutional firm, you’ll need a partner who has your best interests at heart. After all, you don’t want to be stuck in a merger that ends in tears.
The best advice is to get in touch with a knowledgeable partner and ask questions. You’ll likely learn a lot from their experiences. So, the next time you’re in the market for a new company, take the opportunity to evaluate their products and services.