Graham Number Calculator
Calculate a stock's Graham Number fair value using Benjamin Graham's value investing formula. Enter EPS and BVPS to find if a stock is undervalued with margin of safety.
About This Calculator
The Graham Number Calculator helps value investors determine the maximum fair value of a stock using Benjamin Graham's classic formula. Named after the father of value investing, this tool computes the Graham Number by taking the square root of 22.5 multiplied by earnings per share (EPS) and book value per share (BVPS). The number 22.5 represents the product of Graham's maximum allowable price-to-earnings ratio of 15 and maximum price-to-book ratio of 1.5.
To use this calculator, enter the company's trailing twelve months (TTM) earnings per share and the most recent book value per share. You can optionally enter the current stock price to instantly see whether the stock is undervalued or overvalued relative to its Graham Number. The calculator also computes the margin of safety, which shows how far the stock trades below its intrinsic value. A positive margin of safety indicates the stock is undervalued and may present a buying opportunity for long-term investors.
The Graham Number is best suited for companies with positive earnings and tangible assets. It works well for manufacturing, industrial, and consumer goods companies across global markets including India (NSE/BSE), the United States (NYSE/NASDAQ), and the United Kingdom (LSE). For growth stocks or companies with negative earnings, alternative valuation methods like DCF analysis or EBITDA multiples may be more appropriate.
Regional Notes
India: EPS and BVPS data is available from company quarterly results on BSE and NSE websites. Use consolidated figures for the most accurate valuation. The Graham Number is particularly useful for Indian value investors screening Nifty 50 and mid-cap stocks.
United States: Financial data can be sourced from SEC 10-K and 10-Q filings, or financial data providers. The Graham Number is widely used by US value investors as a preliminary screening tool for S&P 500 and small-cap stocks.
United Kingdom: Use data from London Stock Exchange regulatory news filings or company annual reports. The Graham Number works well for FTSE 100 and FTSE 250 constituent companies with consistent earnings history.
Frequently Asked Questions
What is the Graham Number and how is it calculated?
The Graham Number is the maximum fair value of a stock according to Benjamin Graham's value investing formula. It is calculated as the square root of 22.5 multiplied by earnings per share (EPS) multiplied by book value per share (BVPS). The number 22.5 comes from the maximum allowable price-to-earnings ratio of 15 times the maximum price-to-book ratio of 1.5.
How do I know if a stock is undervalued using the Graham Number?
If the current stock price is below the calculated Graham Number, the stock is considered undervalued according to Graham's criteria. Enter the current stock price in the calculator to automatically check. The margin of safety shows how far below the fair value the stock is trading.
What are the conditions for using the Graham Number formula?
Benjamin Graham specified that the price-to-earnings (PE) ratio should be below 15 and the price-to-book (PB) ratio should be below 1.5. Alternatively, the product of PE and PB ratios should be below 22.5. The Graham Number formula assumes these conditions are met for the valuation to be meaningful.
Is the Graham Number still useful for modern stock valuation?
Yes, the Graham Number remains a useful screening tool for value investors, especially for established companies with stable earnings. However, it may be less applicable to high-growth tech stocks or companies with negative earnings. It works best for mature companies with tangible assets and consistent profitability across IN, US, and UK markets.
What inputs do I need for the Graham Number calculator?
You need the earnings per share (EPS) and book value per share (BVPS) from the company's financial statements. Optionally, enter the current stock price to see if the stock is undervalued and the margin of safety. EPS is found on the income statement and BVPS on the balance sheet divided by outstanding shares.
What is a good margin of safety for value investing?
Benjamin Graham recommended a margin of safety of at least 20-30% above the current stock price. A higher margin of safety provides more downside protection. Our calculator shows the margin of safety as a percentage of the Graham Number when you enter the current stock price.
Can I use the Graham Number for any stock?
The Graham Number works best for companies with positive earnings and positive book value. It is less suitable for financial firms, companies with intangible-heavy assets, or businesses with negative earnings. For Indian stocks, use reported EPS and BVPS from BSE or NSE filings. For US stocks, check SEC filings. For UK stocks, refer to London Stock Exchange reports.