Graham Number Calculator
Calculate Benjamin Graham's intrinsic value estimate using EPS and book value per share.
See if a stock is trading below its fair value.
The Graham Number
The Graham Number is a figure that measures a stock’s fundamental value, named after the legendary investor Benjamin Graham. It represents the maximum price a defensive investor should pay for a stock.
Formula:
Graham Number = √(22.5 × EPS × BVPS)
| Variable | Meaning |
|---|---|
| EPS | Earnings Per Share (trailing 12 months) |
| BVPS | Book Value Per Share |
| 22.5 | Derived from Graham’s rules: max P/E of 15 × max P/B of 1.5 |
How to interpret the result:
| Situation | Meaning |
|---|---|
| Stock price < Graham Number | Potentially undervalued — margin of safety exists |
| Stock price ≈ Graham Number | Fairly valued |
| Stock price > Graham Number | Potentially overvalued by value investing standards |
Graham’s two criteria (the 22.5 constant):
- A stock’s P/E ratio should be no more than 15
- A stock’s Price-to-Book (P/B) ratio should be no more than 1.5
- 15 × 1.5 = 22.5 — that’s where the constant comes from
When does the formula not apply?
- When EPS is negative (no real solution exists)
- For growth stocks priced on future potential rather than current earnings
- For financial companies where book value is calculated differently
- When comparing stocks across very different industries
Classic example — hypothetical stock:
- EPS = $4.00, BVPS = $25.00
- Graham Number = √(22.5 × 4.00 × 25.00) = √2,250 ≈ $47.43
- If the stock trades at $35, it appears undervalued relative to Graham’s standard
Limitations: Graham developed this formula in the 1970s. Many modern businesses (software, services) have low book values but high earnings power. The Graham Number works best for traditional asset-heavy businesses like manufacturers, utilities, and banks.
Value investors use it as a quick screen, not an absolute verdict. Always combine it with qualitative analysis of the business.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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