NCAV valuation popularised by Benjamin Graham aims to give a margin of safety versus the likely liquidation proceeds.
Net Current Asset Value (NCAV) was a conservative measure of value employed by Benjamin Graham to give a significant margin of safety. It is calculated as the current assets minus all the firm's (current and long-term) liabilities. Long-term assets (e.g. intangible assets and fixed assets) are not counted.
As a liquidation value measures, it estimates the amount of money that a company might be sold for, if it were to go out of business. If the implied value exceeds the market capitalisation, there could be an arbitrage opportunity to sell off the company's assets but this depends on whether the business is stable enough such that operating losses don't quickly erode the existing assets.
