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Graham's Number Calculator

Estimate the maximum defensive purchase price of a stock using Benjamin Graham's formula.

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Calculation Parameters

Specify your inputs below.

Calculated Result

Graham's Valuation Number $44.38
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Expert Tip

Graham's number represents the upper price limit a defensive investor should pay for a stock, based on Benjamin Graham's rules.

How this Calculator Works

This calculator computes Graham's Number, which represents the maximum fair value defensive investors should pay for a stock. Formulated by value investor Benjamin Graham, it sets a threshold based on earnings per share (EPS) and book value per share (BVPS). Value investors use it to buy with a margin of safety.

Formula & Methodology

Graham's Number = Sqrt(22.5 * EPS * BVPS) - EPS is the Earnings Per Share. - BVPS is the Book Value Per Share. - 22.5 is a constant representing Graham's rule of thumb (P/E of 15 multiplied by P/B of 1.5).

Step-by-Step Calculation Example

Here is a step-by-step example showing how the calculations are performed:

A stock has an EPS of $3.00 and a Book Value Per Share (BVPS) of $20. 1. Multiply EPS, BVPS, and the constant: 22.5 * 3.00 * 20 = 1,350. 2. Take the square root: Sqrt(1,350) = 36.74. Result: Graham's Number for the stock is $36.74, suggesting it is a defensive buy at or below this price.

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Detailed Insights & Expert Guide

ℹ️ About this Calculation

This equity research and valuation calculator evaluates corporate fundamentals, stock price multiples, cost of capital, dividend discount models, and shareholder return metrics based on SEC financial reporting and Wall Street equity analysis standards.

Variable Glossary

Input

Equity Inputs

Share price, earnings per share (EPS), dividend amount, book value, debt/equity ratio, or systematic beta coefficient.

Parameter

Valuation Output

Price-to-Earnings (P/E), EV/EBITDA multiple, Intrinsic Value ($), WACC %, or Return on Equity (ROE %).

How to Calculate Step-by-Step

1

Step 1

Input current stock price, shares outstanding, or balance sheet / income statement numbers.

2

Step 2

Enter expected growth rate, cost of equity, or market risk premium assumptions.

3

Step 3

Review calculated valuation multiples, margin of safety comparison, or required rate of return.

FAQ

What is WACC and why is it crucial for equity valuation?
Weighted Average Cost of Capital (WACC) represents a company's required average return on debt and equity capital. It is used as the hurdle rate to discount future cash flows in DCF valuation models.
How does stock Beta measure systematic risk?
A stock beta of 1.0 means price volatility matches the broader market index. Beta > 1.0 indicates higher volatility, while Beta < 1.0 reflects lower systematic volatility.
Should valuation multiples be evaluated in isolation?
No. Valuation ratios (P/E, EV/EBITDA, P/B) should always be benchmarked against industry peer groups, historical trading averages, and expected earnings growth (PEG ratio).