Graham Number Calculator
Estimate a stock's fair value with the Graham number and Benjamin Graham's growth formula.
About the Graham Number Calculator
Benjamin Graham suggested a defensive investor pay no more than 15 times earnings and 1.5 times book value, and 15 × 1.5 = 22.5, giving the Graham number √(22.5 × EPS × BVPS). His revised growth formula (The Intelligent Investor, 1974) values a stock at EPS × (8.5 + 2g) × 4.4 ÷ Y, where 4.4 was the AAA bond yield of his day and Y is today's. Both are rough screens, best for stable, profitable companies.
The formula
Graham number = √(22.5 × EPS × BVPS); V = EPS × (8.5 + 2g) × 4.4 ÷ Y
Worked example
Example: Graham number = $66.75
- Inputs: Earnings per share: $6; Book value per share: $33; Current price: $88; Expected growth (7–10 years): 9 % a year; AAA corporate bond yield: 5.8%.
- Formula: Graham number = √(22.5 × EPS × BVPS); V = EPS × (8.5 + 2g) × 4.4 ÷ Y
- Result: Graham number = $66.75
- Graham number √(22.5 × EPS × BVPS): $66.75
- Revised Graham formula: $120.62
- Margin of safety (vs Graham number): -32%
Questions people ask
Does it work for tech stocks?
Poorly; asset-light growth companies have low book values.
Where's the AAA yield?
Moody's Seasoned Aaa Corporate Bond Yield (FRED series AAA).