NCAV vs NTAV vs Book Value: Which Cheapness Test to Use?

The three metrics at a glance

• NCAV (net current asset value): Current assets - total liabilities. Extreme conservatism; ignores noncurrent assets.
• NTAV (net tangible asset value): Total assets - intangibles - total liabilities. Includes PP&E but drops goodwill/patents.
• Book value: Total assets - total liabilities. Keeps intangibles; most lenient of the three.

When to use each

• NCAV: Distressed, cash-box, or liquidatable situations; microcaps with questionable earnings.
• NTAV: Capital-heavy businesses where PP&E has resale value (shipping, REIT-like, certain industrials).
• Book value: Stable franchises where intangibles are meaningful (brands, software) and balance sheet is clean.

Discount rules of thumb

• NCAV: Pay <= two-thirds of NCAV after haircuts.
• NTAV: Demand at least a 25-40 percent discount to NTAV, bigger if assets are specialized.
• Book: Use only with quality screens; seek a discount if returns on equity are volatile.

Haircut guidance

• Intangibles: zero in NCAV/NTAV; keep only if contract-backed.
• PP&E: resale-based; 0-70 percent depending on asset fungibility.
• Inventory and receivables: apply the liquidity-trap haircuts before computing NCAV.

How to screen

• Start with NCAV for net-net hunting.
• Layer NTAV for asset-heavy names that fail NCAV but still carry tangible backing.
• Use book value only with profitability and stability filters to avoid value traps.

Internal links and tools

• Balance-sheet events: Shares outstanding changes
• Volume tell: Interesting volume events
• Price pressure: Near-lows scanner
• Sentiment: Short interest changes
• More reading: Resources hub

Compliance note

This guide is educational and not investment advice. Do your own research or consult a professional adviser.