Graham Number Calculator
Estimate the fair value of a stock using Benjamin Graham's conservative valuation formula.
Enter Stock Data
The current market price of the stock
Annual EPS (TTM) — must be positive
Total shareholder equity ÷ shares outstanding
Enter stock price, EPS, and book value above to calculate
Understanding the Graham Number
What is the Graham Number?
The Graham Number is a conservative fair-value estimate for a stock, derived from the principles of Benjamin Graham — the father of value investing and mentor to Warren Buffett. Formalised in Graham's seminal work The Intelligent Investor (1949), it combines two fundamental metrics: a company's earnings power (EPS) and its balance-sheet value (BVPS). The underlying logic is that a conservative investor should not pay more than what is justified by both what a company earns and what it owns.
What does 22.5 mean?
Graham proposed two maximum limits for a conservatively priced stock:
- →The P/E ratio (Price-to-Earnings) should not exceed 15
- →The P/B ratio (Price-to-Book) should not exceed 1.5
Multiplying these two limits: 15 × 1.5 = 22.5. The square root structure of the formula ensures this constant acts as a geometric ceiling for the combined PE and PB criteria simultaneously — providing a single number that embeds Graham's dual Conservative investor standards.
Interpretation Guide
| Price vs Graham Number | Status | Interpretation |
|---|---|---|
| More than 30% below | Deep Value | Significantly below conservative fair value. May indicate genuine undervaluation or hidden risk — requires investigation. |
| 10–30% below | Undervalued | Moderately below fair value. Warrants further research; could be a value opportunity. |
| Within ±10% | Fairly Valued | Priced near Graham's estimate. Neither a clear bargain nor obviously expensive. |
| 10–30% above | Overvalued | Priced above the conservative estimate. May still be justified by growth quality or moat strength. |
| More than 30% above | Expensive | Significantly above conservative fair value. Typical of high-growth or momentum-driven stocks. |
Important Limitations
- •Works best for stable, profitable companies with consistent earnings — not startups or high-growth tech stocks.
- •Cannot be calculated when EPS or BVPS is zero or negative; inapplicable for loss-making businesses.
- •Less meaningful for asset-light businesses (software, services) where book value understates true worth.
- •Does not account for debt levels, growth rates, competitive moat, or management quality.
- •Never use this as the sole basis for an investment decision — combine with DCF, peer analysis, and qualitative research.