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Graham Number Calculator
Calculate per share values
Graham Number Calculator: Find Undervalued Stocks with Precision
| Primary Goal | Input Metrics | Output | Why Use This? |
| Intrinsic Valuation | Earnings Per Share (EPS), Book Value Per Share (BVPS) | Graham Number (Fair Value) | Provides a mathematical "ceiling" price to ensure a margin of safety before investing. |
Understanding the Graham Number
In the architecture of value investing, the Graham Number serves as a fundamental defensive barrier. Developed by Benjamin Graham, it identifies the upper price limit a defensive investor should pay for a stock. The calculation relies on the relationship between a company's profitability (Earnings) and its tangible net worth (Book Value).
This calculation matters because it prevents investors from overpaying for growth. While modern markets often ignore tangible assets, the Graham Number anchors valuation in reality. It posits that the product of the price-to-earnings ($P/E$) and price-to-book ($P/B$) ratios should not exceed 22.5. This constant represents Graham's belief that a fair $P/E$ is $15$ and a fair $P/B$ is $1.5$ ($15 \times 1.5 = 22.5$).
Who is this for?
- Value Investors: Seeking stocks trading with a significant "Margin of Safety."
- Defensive Investors: Looking for stable companies with strong balance sheets.
- Portfolio Managers: Using quantitative filters to screen for undervalued assets.
- Beginner Stock Pickers: Needing a straightforward, non-speculative valuation metric.
The Logic Vault
The Graham Number is the square root of the combined earnings, book value, and Graham's constant.
The Core Formula
$$GN = \sqrt{22.5 \times EPS \times BVPS}$$
Variable Breakdown
| Name | Symbol | Unit | Description |
| Earnings Per Share | $EPS$ | $ | Trailing 12-month net income divided by outstanding shares. |
| Book Value Per Share | $BVPS$ | $ | Total equity minus preferred stock, divided by outstanding shares. |
| Graham Constant | $22.5$ | - | The maximum product of $P/E$ ($15$) and $P/B$ ($1.5$). |
| Graham Number | $GN$ | $ | The calculated intrinsic "Fair Value" per share. |
Step-by-Step Interactive Example
Scenario: Analyzing TD Synnex (SNX) during a period of potential undervaluation.
- Gather Data: $EPS = \mathbf{\$10.47}$, $BVPS = \mathbf{\$75.82}$.
- Multiply by Constant:$$22.5 \times 10.47 \times 75.82 = \mathbf{17,860.84}$$
- Calculate the Square Root:$$sqrt{17,860.84} = mathbf{\$133.65}$$
- Compare to Market Price:If the stock is trading at $101.80, it is currently $31.85 below its Graham Number.
Result: The stock is undervalued by approximately 31%, offering a substantial margin of safety.
Information Gain: The "Asset-Light" Distortion
A common user error is applying the Graham Number to modern technology or SaaS companies.
Expert Edge: Competitors often fail to mention that the Graham Number is biased toward Capital-Intensive Industries (like manufacturing or utilities). In the 2026 digital economy, many high-value companies have low "Book Value" because their primary assets are intangible (code, brand, patents). If you use this formula on a software giant, it will almost always look "overvalued." For true Information Gain, only apply the Graham Number to companies where physical assets and steady earnings are the primary drivers of value.
Strategic Insight by Shahzad Raja
"In 14 years of architecting SEO and tech systems, I've seen how 'magic numbers' can lead to tunnel vision. Shahzad's Tip: Never use the Graham Number in isolation. It is a filter, not a final answer. A stock trading below its Graham Number might be a 'Value Trap'—a company that is cheap because its business model is dying. On ilovecalculaters.com, we recommend pairing this result with a check on debt-to-equity ratios. A low price is only a bargain if the company isn't drowning in liabilities that the Graham Number doesn't explicitly penalize."
Frequently Asked Questions
What happens if EPS is negative?
The Graham Number cannot be calculated for companies with negative earnings, as you cannot take the square root of a negative number. This formula is strictly for profitable, established businesses.
Why is the constant 22.5?
Graham believed that a conservative investor should not pay more than 15 times earnings or 1.5 times book value. Since $15 \times 1.5 = 22.5$, this number serves as the mathematical bridge for the combined valuation.
Is a stock always a 'buy' if it's below the Graham Number?
No. It simply means the stock is mathematically "cheap" based on current assets and earnings. You must still investigate management, competition, and industry trends.
How does the Graham Number differ from DCF?
Discounted Cash Flow (DCF) predicts future cash; the Graham Number looks at current assets and trailing earnings. The Graham Number is more conservative because it doesn't rely on future growth assumptions.
Related Tools
- DCF Calculator: Forecast intrinsic value based on future growth projections.
- P/E Ratio Calculator: Compare the current earnings multiple against industry peers.
- Debt-to-Equity Tool: Ensure the "undervalued" stock isn't carrying excessive risk.
