Apply Benjamin Graham's value tests to any stock. Enter EPS, book value per share and the price to get the Graham number, his growth-based intrinsic value formula and the margin of safety, plus a checklist of his P/E and P/B limits.
Last updated:
$
Trailing 12 months; Graham preferred a 3-year average.
$
Shareholders' equity ÷ shares outstanding.
$
22.5 = max P/E 15 × max P/B 1.5.
Graham intrinsic value formula
% / yr
Enter as a whole number, e.g. 6 for 6%.
%
Look up today's Moody's Aaa yield; 4.4% was the 1962 average Graham used.
Enter your values to see the result.
Advertisement
Advertisement
How to use the Graham Number Calculator
Enter EPS and book value per share from the latest annual report or a financial site.
Add the current share price to see the margin of safety and the P/E × P/B test.
Enter expected EPS growth for the next 7–10 years and today's AAA corporate bond yield for the intrinsic value formula.
Choose the formula version: bond-yield adjusted (revised) or original, and optionally the conservative variant.
Review the results and checklist, and use the growth table to see how much the value depends on your growth estimate.
Benjamin Graham's formulas
Graham number = √(22.5 × EPS × BVPS). Equivalent to the price at which P/E × P/B = 22.5.
Original intrinsic value (1962) = EPS × (8.5 + 2g)
Revised intrinsic value (1974) = EPS × (8.5 + 2g) × 4.4 ÷ Y, with Y = current AAA corporate bond yield
Conservative variant often used today = EPS × (7 + 1g) × 4.4 ÷ Y
Margin of safety = (value − price) ÷ value × 100
In the formulas g is entered as a whole number: 6% growth means g = 6, so 8.5 + 2 × 6 = 20.5 times earnings.
Example
Item
Calculation
Result
Graham number
√(22.5 × 4.20 × 28)
$51.44
Original value
4.20 × (8.5 + 2 × 6)
$86.10
Revised value (Y = 5.3%)
86.10 × 4.4 ÷ 5.3
$71.48
Margin of safety at $45
(51.44 − 45) ÷ 51.44
12.5%
Graham's checklist for the defensive investor
Adequate size and a strong financial condition (current assets at least twice current liabilities).
Positive earnings in each of the past 10 years and an uninterrupted dividend record of 20 years.
Earnings growth of at least one-third over 10 years.
P/E no more than 15 on average earnings, P/B no more than 1.5, or a product under 22.5.
These are educational rules of thumb summarized from Graham's published methods, not investment advice. Accounting changes since his time (intangibles, buybacks) mean many quality companies never pass.
Frequently asked questions
What is the Graham number?
The Graham number is the highest price a defensive investor should pay for a stock according to Benjamin Graham: √(22.5 × EPS × book value per share). With EPS of $4.20 and book value of $28, it is √(22.5 × 4.2 × 28) = $51.44.
Where does 22.5 come from?
Graham suggested paying no more than 15 times earnings and 1.5 times book value. Multiplying 15 × 1.5 gives 22.5. He allowed a higher P/E if the P/B was lower, as long as P/E × P/B stayed under 22.5, which is exactly what the Graham number tests.
What is Graham's intrinsic value formula?
In its revised form, V = EPS × (8.5 + 2g) × 4.4 ÷ Y, where 8.5 is the P/E for a company with no growth, g is the expected annual growth rate over 7–10 years (as a whole number), 4.4 was the average AAA bond yield in 1962 and Y is today's AAA corporate bond yield.
Is the Graham number the same as intrinsic value?
No. The Graham number caps what you should pay based on earnings and assets, without growth. The intrinsic value formula adds growth. Graham also wanted a margin of safety: buying well below estimated value, often at two-thirds or less.
Why can't the Graham number be calculated for some stocks?
If EPS or book value is negative, the product under the square root is negative and the result is undefined. Graham would exclude such companies anyway: a defensive investor needs consistent profits and positive equity.
Does the Graham number work for growth or tech stocks?
Usually not well. Companies with few tangible assets, large buybacks or high growth often trade far above their Graham number. The measure suits stable, asset-heavy businesses such as banks, insurers, industrials and utilities.
What bond yield should I use?
Use the current yield on AAA-rated corporate bonds, such as Moody's Seasoned Aaa Corporate Bond Yield, published by the Federal Reserve. Higher yields lower the intrinsic value because they raise the return investors can earn elsewhere.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.