Net Tangible Assets (NTA)
If you want to know the net worth of a company, refer to its net
tangible assets. NTA is calculated as follows:
NTA = Shareholders’ funds – goodwill (if any)
No. of share issued
It is the value of assets attributable to shareholders expressed as
per-share basis. The higher the value of NTA, the more
financially sound a company is.
In general, investors are recommended not to pay for a share
price that is more than its NTA. However, stocks from service
and finance industries usually can command higher share prices
with respect to their NTA. In addition, there is another NTA
formula which is widely used by most analysts it’s known as
“Price to NTA”. This formula is used to compare a stock’s price
to its NTA:
Price to NTA = Market price
NTA
Also, please take note of the valuation dates of assets such as
land and property. The company may over estimate its assets if
the valuation was done during the property boom (1993 – 1997).
Or the company may underestimate its assets if the valuation
was done in twenty years ago!
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