Reference Price (Net Asset Value Method) = BPS (Book Value Per Share)
The idea behind it
The net asset value method is based on an idea close to a company's theoretical liquidation value — what shareholders would receive if the company were wound up today. Unlike methods such as the PER-multiple approach or DCF, which incorporate expectations about future earnings, this method focuses solely on the assets a company currently holds.
How to read it
- Book net assets can differ from the actual market value if those assets were sold. Real estate and securities in particular are often carried at historical cost, so unrealized gains or losses may not be reflected.
- Intangible value not reflected on the balance sheet — brand strength, technology, talent — is not captured, which is why this method is sometimes considered less suitable for growth companies or service businesses.
- In practice, it is common to consider this method alongside others such as the PER-multiple method, PBR-multiple method, and DCF.