Net Tangible Assets

[Ferg]

It's one of many factors I look at and one of the lesser important ones. BUT it will depend on what you are investing in and why you are looking at it.

For me the NTA per share sets a floor price - any SP below that is often a good buy BUT that is on the assumption the business is profitable. A profitable business will continue to grow equity (assuming dividends < comprehensive profit) and on the assumption that is not achieved by issuing new shares ==> then the NTA per share will increase. However a business that makes losses and/or adds more shares at a faster rate than the growth in equity means the NTA per share will reduce.

Whilst something may appear cheap relative to NTA, this might be because the market has already priced in further erosion of equity or dilution of NTA per share or maybe the return on assets achieved by Directors & Management is worse than say a term deposit (in other words the risk does not warrant the return).

NTA is very useful when looking at managed funds, unit trusts or property trusts. IMO one shouldn't pay too large a premium over the NTA for these sorts of entities.

On the other hand a share price over NTA is being valued on some other basis - either something like a multiple of future earnings or discounted future cash flows or maybe even using hopium.

But coming back to my original sentence, it is one of many factors I look at. However, it usually carries little weight unless it should be used for the type of entity being invested in as noted above, or if there is some other issue where it can be used as a trump card to say "no" (e.g. negative NTA in a new IPO). Sometimes it is simply a "nice to know" and forms little part of my investment decision process.