About the Graham Number Calculator
Benjamin Graham, the father of value investing, left two well-known shortcuts for judging whether a stock is cheap. The Graham number, √(22.5 × EPS × book value per share), is the highest price a defensive investor should pay under his rule that the P/E should not exceed 15 and the P/E times price-to-book should not exceed 22.5. The Graham formula, V = EPS × (8.5 + 2g) × 4.4 ÷ Y, estimates intrinsic value for a growing company using its expected growth rate and today’s high-grade corporate bond yield.
This Graham number calculator computes both, then compares them with the current share price to show a margin of safety, along with the P/E, P/B and their product. It suits value investors screening for undervalued stocks and anyone learning classic valuation.
Both are rough screens, not precise valuations. They need positive earnings and book value, they ignore balance-sheet quality and intangible assets, and Graham presented the growth formula’s results as rough illustrations rather than reliable valuations, and the result is very sensitive to the growth rate you assume. Use normalized (average) earnings rather than one unusual year.
With the default inputs, the graham number is $76.49. Change any value above to recalculate instantly.
How to use the graham number calculator
- 1Enter earnings per share — ideally an average of several years.
- 2Enter book value per share from the latest balance sheet.
- 3Enter the current share price and an expected long-term growth rate.
- 4For the revised formula, enter the current AAA corporate bond yield.
- 5Read the margin of safety: positive means the price is below the Graham value.
Formula and method
In The Intelligent Investor Graham suggested a defensive investor pay no more than 15 times average earnings and no more than 1.5 times book value — or, combined, a P/E multiplied by P/B of no more than 22.5. Solving price² ÷ (EPS × BVPS) = 22.5 for price gives the Graham number.
The growth formula from Security Analysis values a stock at 8.5 times earnings (his P/E for a no-growth company) plus twice the expected annual growth rate g, in percent. In 1974 he added the factor 4.4 ÷ Y, where 4.4% was the AAA corporate bond yield when he developed it and Y is today’s yield, so the value falls when interest rates rise. Margin of safety is (value − price) ÷ value.
- EPS
- Earnings per share
- BVPS
- Book value (shareholders’ equity) per share
- g
- Expected annual growth rate over 7–10 years, in percent
- Y
- Current AAA corporate bond yield, in percent
Worked examples
EPS $6.50, book value $40, price $95
√(22.5 × 6.5 × 40) = √5,850 = $76.49, so at $95 the stock is about 24% above its Graham number. The growth formula gives 6.5 × (8.5 + 12) × 4.4 ÷ 5.3 = $110.62, a 14% margin of safety for an investor who trusts the 6% growth forecast.
Cheap value stock
√(22.5 × 3.2 × 18) = $36, just above the $35 price, and P/E × P/B is 21.3 — inside Graham’s 22.5 limit. The growth formula value of $43.83 suggests a 20% margin of safety.
Original 1962 formula
The original formula is simply 11 × (8.5 + 16) = $269.50, without the bond-yield adjustment, so it ignores today’s higher interest rates. The Graham number of $153.34 is a more conservative check.
Frequently asked questions
What is the Graham number?+
The Graham number is √(22.5 × EPS × book value per share). It is the maximum price a defensive investor should pay under Benjamin Graham’s rule that a stock’s P/E times its price-to-book ratio should not exceed 22.5 (15 × 1.5).
What is the Benjamin Graham formula?+
Graham’s growth formula is V = EPS × (8.5 + 2g), where g is the expected annual growth rate. His 1974 revision multiplies by 4.4 ÷ Y, where Y is the current AAA corporate bond yield, to adjust for interest rates.
Why 22.5 in the Graham number?+
Graham advised paying no more than 15 times earnings and 1.5 times book value. Multiplying the two limits gives 22.5, and he allowed a lower P/E to offset a higher P/B as long as the product stayed under 22.5.
Does the Graham number work for tech or growth stocks?+
Usually not. Companies with large intangible assets, buybacks or rapid growth have small book values, so the Graham number is far below their market price. It works best for asset-heavy, stable, profitable businesses.
Where do I find the AAA corporate bond yield?+
The Federal Reserve Bank of St. Louis publishes Moody’s Seasoned Aaa Corporate Bond Yield (series AAA) on its FRED database. Use the latest monthly or daily value as Y in the revised formula.
What margin of safety did Graham recommend?+
Graham’s margin of safety was the gap between intrinsic value and price, protecting against errors and bad luck. Many value investors look for prices at least 25–33% below their estimate of value.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.