Graham Number Calculator

The Graham Number calculator computes Benjamin Graham's formula for the maximum price a defensive investor should pay for a stock, based on its earnings per share and book value per share. It is used by value investors who follow Graham's principles from "The Intelligent Investor" to screen for undervalued stocks with a margin of safety.

How to Use the Graham Number Calculator

1. Find the company's most recent annual earnings per share (EPS). Use trailing twelve months (TTM) EPS.
2. Find the book value per share (BVPS) from the balance sheet: total shareholders' equity divided by shares outstanding.
3. Enter both values into the calculator.
4. Compare the Graham Number against the current share price.
5. A stock trading below its Graham Number may offer a margin of safety; one trading significantly above it may be overvalued by Graham's standards.

The Formula

Graham Number = Square Root of (22.5 multiplied by EPS multiplied by Book Value Per Share)

Where:

• EPS is earnings per share (trailing twelve months, excluding extraordinary items)
• Book Value Per Share is tangible book value per share (excluding goodwill and intangible assets)
• 22.5 derives from Graham's maximum acceptable P/E of 15 multiplied by his maximum acceptable Price-to-Book of 1.5 (15 multiplied by 1.5 = 22.5)
• The result is the maximum fair-value price, not a target price

Graham intended this as a conservative screening tool, not a precise valuation method. It identifies the outer boundary of acceptable price rather than a specific intrinsic value.

Real-World Example

A company has EPS of £2.80 and a tangible book value per share of £16.40.

Graham Number = Square Root of (22.5 multiplied by 2.80 multiplied by 16.40) = Square Root of (22.5 multiplied by 45.92) = Square Root of 1,033.2 = £32.14

If the share currently trades at £26, it is approximately 19% below the Graham Number, suggesting a margin of safety and potential undervaluation by Graham's criteria. If it trades at £40, it trades at a 24% premium to the Graham Number, indicating it does not meet his value criteria.

Limitations: What the Graham Number Does Not Capture

The Graham Number was developed in the 1940s and 1960s for an era dominated by asset-heavy industrial companies where book value was a reliable measure of worth. It has significant limitations for modern investing. Technology, software, and services companies often have minimal tangible assets but substantial earning power, so their book values are very low, making the Graham Number unrealistically small. Brands, intellectual property, and platform effects that drive earnings are not captured on the balance sheet. Additionally, some companies with strong earnings and high book values may still be poor investments due to competitive decline or capital allocation problems. Use the Graham Number as a starting screen, not a conclusive valuation, and always supplement it with qualitative business analysis.

Frequently Asked Questions

Who was Benjamin Graham and why does his formula matter? Benjamin Graham was a Columbia University professor and pioneering investor who developed the foundations of value investing. He was Warren Buffett's mentor. His books "Security Analysis" and "The Intelligent Investor" remain foundational texts for serious equity investors. The Graham Number reflects his conservative philosophy of only buying assets with a clear margin of safety.

Should I use reported EPS or adjusted EPS in the formula? Graham recommended using normalised earnings that exclude exceptional items, consistent with his focus on sustainable earning power. Avoid using peak earnings from cyclical highs; instead, use a multi-year average if the business is cyclical. Use tangible book value, excluding goodwill and other intangibles, to maintain conservatism.

Does the Graham Number work for financial companies? It works reasonably well for banks and insurers because book value is a meaningful measure for financial institutions. However, the quality of a bank's book value depends heavily on the quality of its loan book, which requires deeper analysis than a simple formula can provide.

What P/E and P/B limits did Graham recommend? Graham suggested a P/E ratio no higher than 15 and a Price-to-Book ratio no higher than 1.5 for defensive investors. He also noted that the product of the two ratios should not exceed 22.5, which is the origin of the 22.5 multiplier in the Graham Number formula.

Understanding the Graham Number

The Graham Number is one of the most-requested tools in the graham number category because it condenses a calculation that would otherwise require manual work, a spreadsheet, or a specialist program into a single input-and-output step. whether you are a student, a professional, or a curious learner, the Graham Number is designed to deliver a quick and trustworthy answer without forcing you to install anything or sign up for an account. Behind the scenes, the Graham Number applies well-established mathematical or scientific formulas to the values you provide. the aim of Graham Number is to remove the friction of hand calculation while still showing you the underlying method, so you can confidently interpret the result. Every calculation is performed locally in your browser, which means your inputs never leave your device.

When Should You Use the Graham Number Calculator?

Use the Graham Number Calculator whenever you need a quick, reliable answer that fits the tool's scope. Common situations for the Graham Number Calculator include homework problems, workplace tasks, financial planning, fitness or health tracking, and everyday curiosity. If the Graham Number Calculator answer will be used for a decision that has legal, medical, or financial consequences, treat the result as a starting point and verify it with a qualified professional. The Graham Number Calculator is free to use, requires no sign-up, and works on any device with a modern browser. You can run the Graham Number Calculator as many times as you like, change the inputs, and compare results side by side.

Common Inputs and How to Choose Them

Most Graham Number Calculator problems revolve around a small set of inputs.

• Find the company's most recent annual earnings per share (EPS). Use trailing twelve months (TTM) EPS is usually the first value to pin down for the Graham Number Calculator.
• Find the book value per share (BVPS) from the balance sheet: total shareholders' equity divided by shares outstanding sets the context the Graham Number Calculator needs for a sensible result.
• both values into the calculator refines the Graham Number Calculator output where the data is available. Identifying the right values is the most important step for the Graham Number Calculator, because the answer is only as accurate as the data you put in. If a value is unknown, prefer a conservative estimate over a guess when using the Graham Number Calculator.

How to Interpret the Result

The numerical answer from the Graham Number Calculator alone is rarely the whole story. Read the units, the precision, and any warnings shown alongside the Graham Number Calculator result. Understanding the path from inputs to output in the Graham Number Calculator makes it easier to spot errors, communicate the result to others, and reuse the method for related problems in the future.

Worked Examples

A typical Graham Number Calculator run takes reasonable inputs, produces a sensible answer, and returns it in a single click. Example: A company has EPS of £2.80 and a tangible book value per share of £16.40. Graham Number = Square Root of (22.5 multiplied by 2.80 multiplied by 16.40) = Square Root of (22.5 multiplied by 45.92) = Square Root of 1,033.2 = £32.14 If the share currently trades at £26, it is approximately 19% below the Graham Number, suggesting a margin of safety and potential undervaluation by Graham's criteria. If

Common Mistakes to Avoid

Common mistakes with the Graham Number Calculator:

• Mixing up units (for example, entering one unit when the Graham Number Calculator expects another).
• Forgetting to convert percentages to decimals or vice versa where the Graham Number Calculator formula requires it.
• Using a snapshot value that no longer reflects reality for the Graham Number Calculator, especially for time-sensitive inputs like prices, rates, or counts.
• Rounding intermediate steps too early and then carrying the rounded value forward in the Graham Number Calculator.
• Treating the Graham Number Calculator as a substitute for professional advice when the decision is high-stakes.

Limitations and Assumptions

No calculator is a perfect model of reality, and the Graham Number Calculator is no exception. The Graham Number Calculator makes simplifying assumptions to keep the math tractable: it ignores rare cases, applies default values where inputs are missing, and uses formulas that suit the typical situation rather than the exotic one. When your situation falls outside the typical case, the Graham Number Calculator result may drift further from the truth. If you need a more precise answer than the Graham Number Calculator provides, the next step is usually a specialist, a more detailed reference, or a domain-specific tool.

Related Tools and References

For more depth on the Graham Number Calculator topic, consult textbooks, academic papers, or reputable online resources. Reputable sources for the Graham Number Calculator include government statistics agencies, university extension services, and peer-reviewed journals. Wikipedia is a useful starting point for definitions and formulas behind the Graham Number Calculator, but always follow the citations to the original source before relying on a number. If you find that you need the same Graham Number Calculator calculation repeatedly, consider writing down the inputs and the result in a note so you can build a personal record over time.

Quick Reference

• Free to use: yes, no sign-up required.
• Privacy: all calculations run locally in your browser.
• Units: metric and imperial supported where applicable; check the input labels.
• Speed: instant, no page reload.
• Mobile friendly: yes, works on phones and tablets.
• Offline: once the page has loaded, the calculation continues to work without a network connection.

References - General-purpose math references such as Wolfram MathWorld and Khan Academy for foundational formulas.

• Wikipedia articles on the relevant topic, with citations to primary sources, cover the Graham Number Calculator background.
• Peer-reviewed journals and textbooks give the most rigorous treatments of the Graham Number Calculator method.Tools/tools/calculator) - Percentage Calculator - Unit Converter

Also try these free tools:

• Book Value Per Share Calculator
• EPS Calculator
• DCF Calculator