Benjamin Graham looked for equities trading at less than 66% of their Net Current Asset Value.
Where, NCAV (Net Current Asset Value) = Current Assets - TOTAL Liabilities.
Note that Graham calculated NCAV using total liabilities, and not just current liabilities. By using only current assets he also excluded plant and equipment, and goodwill in his calculation of NCAV. This is important, because during liquidation all creditors will demand repayment, but the valuation of plant and equipment will be impaired.
The 66% discount to NCAV provided Graham a "margin of safety".
The modern-day equivalent of NCAV is "book to tangible book value". What you want is equities that have a "book to tanglible book" ratio less than 1, a debt-to-total-equity ratio of less than 1, a price-to-earnings ratio that is competitive with peers in its sector, and a "book-to-total-free-cash-flow' ratio in the low single digits.
See ExxonMobil, for instance.
You can find all of these valuation ratios on the Reuters website.
Where, NCAV (Net Current Asset Value) = Current Assets - TOTAL Liabilities.
Note that Graham calculated NCAV using total liabilities, and not just current liabilities. By using only current assets he also excluded plant and equipment, and goodwill in his calculation of NCAV. This is important, because during liquidation all creditors will demand repayment, but the valuation of plant and equipment will be impaired.
The 66% discount to NCAV provided Graham a "margin of safety".
The modern-day equivalent of NCAV is "book to tangible book value". What you want is equities that have a "book to tanglible book" ratio less than 1, a debt-to-total-equity ratio of less than 1, a price-to-earnings ratio that is competitive with peers in its sector, and a "book-to-total-free-cash-flow' ratio in the low single digits.
See ExxonMobil, for instance.
You can find all of these valuation ratios on the Reuters website.