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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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