Price to NCAV Ratio: Calculation and Example

The 6 accounting principles that govern in SpainThe PNCAV (Price to Net Current Asset Value) ratio has been one of the balance-based valuation ratios most used. Although it "went out of style" for a while, this ratio has returned to the scene by showing that it is capable of beating the market again. In this article we will see what the PNCAV ratio is, how it is calculated, an example and its advantages and disadvantages.

¿Qué mide el ratio Price to Net Current Asset Value?

The PNCAV ratio measures the relationship between the price of a share and the value of its net current assets (“Net Current Asset Value” or “NCAV”).

It was one of the ratios most used by Benjamin Graham's disciples in the early days of value investing.

Cálculo del ratio Price to NCAV

The Price to NCAV ratio formula is as follows:

PNCAV = Market Capitalization / Net Current Assets


  • Net Current Assets = Current assets - Total debt
  • Capitalization bursátil= Price per share * number of shares

Example of the calculation of this ratio

A company trades at € 4 per share. The company has 10 million shares outstanding. It has current assets of 100 million euros and total debts of 50 million.

With these data we can calculate your PNCAV ratio:

  1. Stock capitalization = 4 * 10.000.000 = 40.000.000
  2. Net current assets = 100.000.000 - 50.000.000 = 50.000.000
  3. PNCAV = 40.000.000 / 50.000.000 = 0,8

In this case, the company could be a good investment according to the PNCAV ratio.

Advantages of the PNCAV ratio

The Price to NCAV ratio is a very prudent ratio when calculating the equity value of a share.

In addition, it is a very easy ratio to calculate. Some websites, such as Gurufocus, automatically calculate the NCAV of each share, so that the calculation of this ratio only requires a simple division.

Inconvenientes del ratio Price to Net Current Asset Value

This ratio is not the most recommended to determine the value of a company in most cases, since it is excessively prudent. Only part of the value of current assets, without giving any value to the company's fixed assets or to the company's fixed assets. Therefore, in most cases it underestimates the calculation of the equity value of companies, making it almost impossible to find companies that are listed at an attractive price according to this ratio.

As with the rest of the valuation ratios based on the balance sheet, the PNCAV ratio does not take into account profits or future cash flows, so this fact means that its usefulness is limited to stagnant or crisis companies.