Graham Number Calculator
Calculate the maximum price a value investor should pay for a stock using Benjamin Graham's classic formula. Enter EPS and book value to find the Graham Number, the conservative ceiling for the stock's fair value based on current fundamentals.
Enter Stock Data
Benjamin Graham's formula uses EPS and book value to find the maximum price a conservative investor should pay.
Graham Number
Overvalued$66.24
vs. current price of $150.00(-55.8%)
Detailed Breakdown
Graham Number
$66.24
√(22.5 × 6.50 × 30.00)
Current P/E
23.1x
Graham implies 10.2x
Current P/B
5.0x
Graham implies 2.2x
P/E × P/B
115.4
Graham's limit: ≤ 22.5
The Graham Number Formula
Graham Number = √(22.5 × EPS × Book Value per Share)
The constant 22.5 comes from Graham's criteria that a stock's P/E ratio should not exceed 15 and its P/B ratio should not exceed 1.5. Since 15 × 1.5 = 22.5, the formula embeds both conditions into a single number.
If the current stock price is below the Graham Number, the stock passes Graham's basic value screen. For a deeper analysis, use our composite fair value calculator which includes DCF, PEG, and DDM models alongside the Graham Number.
The Graham Number Explained
Benjamin Graham believed that a stock's price should reflect both its earning power (represented by EPS) and its asset backing (represented by book value). The Graham Number combines both into a single maximum-buy-price.
The formula: Graham Number = √(22.5 × EPS × Book Value per Share)
The 22.5 constant embeds Graham's two criteria: a P/E ratio no higher than 15 and a P/B ratio no higher than 1.5. Any stock priced at or below the Graham Number satisfies both conditions.
When to Use the Graham Number
- Value stock screening: Quickly identify stocks trading below Graham's conservative ceiling. Pair with qualitative analysis of the company's business.
- Established, profitable companies: The formula works best for companies with stable earnings and tangible book value (think banks, industrials, and utilities).
- As a conservative floor: In our composite fair value calculator, the Graham Number carries a 25% weight, providing a conservative anchor alongside the growth-oriented DCF and PEG models.
Want to see Graham Numbers for real stocks? We calculate it daily for 510+ US stocks alongside three other valuation models.
Graham Number Calculator FAQ
What is the Graham Number?
The Graham Number is a valuation formula created by Benjamin Graham, the father of value investing and Warren Buffett's mentor. It calculates the maximum price a defensive investor should pay for a stock based on its earnings per share (EPS) and book value per share. The formula is: Graham Number = √(22.5 × EPS × Book Value).
Where does the 22.5 constant come from?
The 22.5 comes from two of Graham's criteria: a P/E ratio no higher than 15 and a P/B ratio no higher than 1.5. When you multiply 15 × 1.5, you get 22.5. The formula essentially ensures that any stock priced at or below the Graham Number satisfies both conditions simultaneously.
What inputs do I need?
You need three numbers: (1) Current stock price, what the stock trades at right now, (2) EPS (Earnings Per Share), the company's trailing 12-month earnings divided by shares outstanding, and (3) Book Value per Share, the company's net assets divided by shares outstanding. All three are available on any financial data website.
How do I interpret the Graham Number?
If the current stock price is below the Graham Number, the stock passes Graham's basic value test and may be undervalued. If the price is above the Graham Number, the stock is more expensive than Graham would recommend. The bigger the gap between price and Graham Number, the stronger the signal.
What are the limitations of the Graham Number?
The Graham Number has several limitations: it doesn't account for growth (a fast-growing company will always look overvalued), it requires positive EPS and book value (excluding unprofitable or asset-light companies), and it was designed for the 1930s-50s market. It works best as a conservative floor for value stocks, not as a standalone valuation for growth companies.
How does the Graham Number compare to DCF?
The Graham Number is backward-looking: it uses current earnings and book value. DCF is forward-looking: it projects future cash flows. Graham Number is simpler and more conservative, while DCF captures growth potential. Our composite fair value calculator uses both (Graham at 25% weight, DCF at 40% weight) for a balanced view.