In order to correctly value real estate stocks, important key figures are required. One of them is the NAV. This is the meaning of value.
Institutional and private investors like to invest in real estate stocks. These have the advantage that the companies have stable value existing properties and building plots. To assess such a share, important key figures such as NAV are required. What does this mean? We clarify.
NAV stands for “Net Asset Value”, which means “net asset value”. Like every company, real estate companies are also obliged to value their real estate portfolio and existing properties on certain dates. It depends on the net value.
The net asset value is determined by deducting the liabilities for these values from the assets (real estate and land). This net asset value is divided by the number of shares. The net asset value of real estate should not be confused with the market value of real estate.
The NAV indicates the intrinsic value (also called book value) of a share.
The book value and the actual stock market price almost always differ from one another. The stock market price is determined from the supply and demand for the respective real estate share. The stock market prices also include future expectations and the respective stock market situation; there is no factual key figure for this.
The stock market price changes constantly every trading day. The net asset value is usually determined twice a year for real estate companies. This is done by external and certified experts.
If the stock market price is below the property value per share, this is referred to as undervaluation. If the stock market price exceeds the book value, the share is said to be overvalued.
In addition to NAV, other key figures are included in the valuation models for shares in real estate companies. These are FFO (Funds from Operation), which stands for cash flow and operating profit (EBIT or EBITDA). The result of this calculation is the fair value of the share. These calculations also include other assets such as receivables and financial resources as well as other company liabilities.
In the published analyses, the NAV is just as unrecognizable as the other key figures. It is stated in the annual reports at the end of the year. It is also stated in the respective quarterly reports. A detailed analysis of these reports is therefore required.
