Graham Number Calculator

The Graham Number is a figure that measures a stock's fundamental value based on its earnings per share (EPS) and book value per share (BVPS). It was developed by legendary investor Benjamin Graham and represents the maximum price a defensive investor should pay for a stock. If a stock trades below its Graham Number, it may be considered undervalued.

The Graham Number formula is: √(22.5 × EPS × BVPS). The 22.5 factor comes from Graham's rule that a stock's P/E ratio should not exceed 15 and its P/B ratio should not exceed 1.5 (15 × 1.5 = 22.5). Simply plug in the stock's annual EPS and book value per share to get the result.

A 'good' Graham Number situation is when the stock's current market price is significantly below its Graham Number — ideally by 30% or more (the 'margin of safety'). This suggests the stock may be undervalued and presents a potential buying opportunity according to Graham's value investing principles.

A stock is considered unfavorably valued when its market price trades well above the Graham Number. This implies the stock may be overvalued relative to its earnings and book value. However, this alone shouldn't be the only reason to avoid a stock — growth prospects and qualitative factors also matter.

The Graham Number is still used as a quick screening tool, but it has limitations in modern markets. It was designed for defensive, asset-heavy companies and doesn't account for growth, intangible assets, or cash flows. Many high-quality tech companies would appear overvalued by this metric even when they aren't. It works best as one of several valuation tools.

The margin of safety is the percentage difference between the Graham Number and the current stock price. A positive margin (stock price below Graham Number) means you're buying at a discount, which provides a buffer against errors in your estimates. Graham himself recommended a margin of safety of at least 33–50% before buying.

No — the Graham Number cannot be calculated if EPS or BVPS is negative, because you cannot take the square root of a negative number. Negative EPS typically means the company is losing money, which signals it may not be suitable for value investing under Graham's framework in the first place.

They are mathematically equivalent: 15 × 1.5 = 22.5. However, expressing them separately as an EPS multiplier (max P/E of 15) and a BVPS multiplier (max P/B of 1.5) allows investors to adjust each component independently. Some analysts lower the EPS multiplier in high-interest-rate environments or raise it for higher-quality companies.