Intrinsic Value Calculator (Graham Number)
Calculate a stock's intrinsic value using Benjamin Graham's classic formula
Input Values
Graham Number Formula:
√(22.5 × EPS × BVPS)
Where 22.5 = 15 (fair P/E) × 1.5 (fair P/B)
Intrinsic Value (Graham Number)
$53.03
Based on EPS of $5.00 and BVPS of $25.00
Understanding the Graham Number
Who was Benjamin Graham?
Benjamin Graham (1894-1976) is known as the "father of value investing." He was a professor at Columbia Business School and the mentor of Warren Buffett. His books "Security Analysis" (1934) and "The Intelligent Investor" (1949) are considered foundational texts in investment theory.
What does the Graham Number represent?
The Graham Number calculates the maximum price a defensive investor should pay for a stock. It considers both earnings power (EPS) and asset backing (Book Value), providing a conservative estimate of intrinsic value that Graham believed would offer a margin of safety.
The 22.5 Multiplier Explained
The number 22.5 comes from Graham's criteria for defensive stock selection:
- •Maximum P/E ratio of 15 (fair value for earnings)
- •Maximum P/B ratio of 1.5 (fair value for assets)
- •15 × 1.5 = 22.5
Limitations
- Only works for profitable companies with positive earnings
- Requires positive book value (doesn't work for companies with negative equity)
- May undervalue high-growth companies with intangible assets
- Best suited for stable, mature companies in traditional industries
Disclaimer: This calculator provides estimates based on the Graham Number formula and should not be considered financial advice. Always conduct thorough research and consider multiple valuation methods before making investment decisions. Past performance does not guarantee future results.
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Educational purposes only. Not financial advice.