Graham Number Calculator

Enter a stock's Earnings Per Share (EPS) and Book Value Per Share to calculate the Graham Number — Benjamin Graham's formula for estimating a stock's maximum fair value using fundamental analysis.

Created by Luis GonzalezLast updated: June 27, 2026

How to Use This Calculator

1
Enter Earnings Per Share (EPS)
Input the company's annual net income divided by outstanding shares. Use the most recent annual figure.
2
Enter Book Value Per Share
Input the company's total shareholders' equity divided by shares outstanding. This is the net asset value per share.
3
Enter Current Stock Price (optional)
Input the stock's current market price to calculate the margin of safety — how far below or above the Graham Number the stock trades.
4
Review your results
The calculator displays the Graham Number, Margin of Safety, Implied Max P/E and P/B ratios, and Earnings Yield. The Insights panel shows derived metrics like return on book value and the combined PE × PB rule assessment.

Example Calculation

An investor is evaluating a stock with an EPS of $2.50 and a Book Value Per Share of $17.92, currently trading at $25.00, to determine its intrinsic value according to Benjamin Graham's principles.

Earnings Per Share (EPS) ($)

2.50

Book Value Per Share ($)

17.92

Current Stock Price ($)

25.00

Results

Graham Number

$31.75

Margin of Safety

21.3%

Implied Max P/E

12.70x

Implied Max P/B

1.77x

Earnings Yield

7.87%

Tips

Look for a Margin of Safety

Graham recommended buying stocks trading at least 20-30% below their Graham Number. Enter the current stock price to instantly see the margin of safety — a 21.3% margin like in the example above suggests a potential value opportunity.

Check the Combined PE × PB Rule

The Insights panel shows whether the stock meets Graham's rule that P/E × P/B should not exceed 22.5. By definition, the Graham Number always produces exactly 22.5, but comparing the stock's actual market multiples to this ceiling helps assess overvaluation.

Use Earnings Yield as a Quick Screen

An earnings yield above 6.67% (the inverse of P/E 15) indicates the stock meets Graham's earnings criteria. The calculator shows this metric automatically — compare it to bond yields to see if the stock offers adequate compensation for equity risk.

Positive Inputs Required

Both EPS and Book Value Per Share must be positive. The Graham Number formula is not applicable for companies with negative earnings or book value, which typically signal financial distress.

Unlocking Intrinsic Value: The Graham Number Calculator

The Graham Number Calculator helps investors quickly determine the maximum fair price for a stock using its Earnings Per Share (EPS) and Book Value Per Share (BVPS). This powerful tool, derived from the principles of value investing pioneer Benjamin Graham, offers a quantitative benchmark for identifying undervalued companies. For example, a stock with an EPS of $2.50 and a BVPS of $17.92 would yield a Graham Number of approximately $31.75, suggesting a potential buy if the market price is significantly lower.

Value Investing Principles: Beyond the Graham Number

The Graham Number is a cornerstone of Benjamin Graham's broader value investing philosophy, emphasizing the crucial concept of a "margin of safety." This principle suggests buying assets at a price significantly below their intrinsic value, providing a buffer against unforeseen business challenges or market fluctuations. While the Graham Number offers a quantitative screening tool, value investing extends beyond mere metrics. It also involves a thorough qualitative analysis of a company's management, competitive advantages, industry position, and financial health. Graham advocated for a disciplined approach, focusing on long-term ownership of stable, understandable businesses trading at a discount. Investors often look for stocks with P/E ratios below 15 and P/B ratios below 1.5 as initial screening criteria, but these are just starting points for deeper due diligence.

The Formula for a Defensive Investor's Price

The Graham Number is calculated using a specific formula designed to identify stocks suitable for a "defensive investor" — one who prioritizes safety and adequate return over speculation.

Graham Number = sqrt(22.5 × EPS × BVPS)

Where:

EPS (Earnings Per Share) represents the company's profitability per share.
BVPS (Book Value Per Share) indicates the company's net asset value per share.
22.5 is derived from Graham's criteria: P/E ≤ 15 and P/B ≤ 1.5 (15 × 1.5 = 22.5).

Additional derived metrics:

Margin of Safety = (Graham Number - Current Price) / Graham Number × 100
Implied Max P/E = Graham Number / EPS
Implied Max P/B = Graham Number / BVPS
Earnings Yield = EPS / Graham Number × 100

💡 For analyzing fixed-income assets, our Bond Accrued Interest Calculator provides essential details for evaluating bond investments.

Valuing a Tech Stock: A Worked Example

An investor is considering a mature technology company with a solid financial history. The company's recent annual report shows:

Earnings Per Share (EPS): $2.50
Book Value Per Share (BVPS): $17.92
Current Stock Price: $25.00

To calculate the Graham Number:

Apply the formula: sqrt(22.5 × 2.50 × 17.92)
- 22.5 × 2.50 = 56.25
- 56.25 × 17.92 = 1,008
- sqrt(1,008) = 31.75
Graham Number: $31.75 — a defensive investor should not pay more than $31.75 per share.
Margin of Safety: (31.75 - 25.00) / 31.75 × 100 = 21.3% — the stock trades 21.3% below fair value.
Implied Max P/E: 31.75 / 2.50 = 12.70x — within Graham's P/E ≤ 15 guideline.
Implied Max P/B: 31.75 / 17.92 = 1.77x — above Graham's P/B ≤ 1.5 guideline.
Earnings Yield: 2.50 / 31.75 × 100 = 7.87% — exceeds Graham's 6.67% threshold.

💡 Compare stock valuations against bond returns using our Bond Amortization Calculator to understand the full picture of your investment alternatives.

Benjamin Graham's Legacy: The Formula for Intrinsic Value

The Graham Number is a direct legacy of Benjamin Graham, often hailed as the "father of value investing" and mentor to Warren Buffett. Graham first articulated his investment principles in his seminal work, Security Analysis (1934), and later popularized them for the individual investor in The Intelligent Investor (1949). The Graham Number emerged from his desire to provide a simple, yet robust, quantitative rule for identifying fundamentally sound companies that offered a "margin of safety." He proposed that a stock should be considered for purchase if its market price was below a calculated intrinsic value, determined by conservative multiples of earnings and book value. This approach, which focuses on a company's underlying assets and earning power rather than speculative growth, profoundly influenced generations of investors, including Buffett, who credits Graham's teachings as the foundation of his own investment success.

Industry Benchmarks for Value Stock Screening

In the realm of value investing, several industry benchmarks complement the Graham Number for screening potential investments. Historically, Benjamin Graham suggested looking for companies with a Price-to-Earnings (P/E) ratio below 15x and a Price-to-Book (P/B) ratio below 1.5x. For instance, a company trading at 12x earnings and 1.2x book value would be considered attractive. Beyond these, a dividend yield exceeding the 10-year Treasury yield (which has typically ranged from 3-5% in 2026) can indicate a stable, income-generating business. A debt-to-equity ratio below 0.5x is another strong indicator of financial health, signaling that a company is not overleveraged. For example, a manufacturing firm with a P/E of 10x, P/B of 1.0x, and a 3% dividend yield would strongly align with traditional value criteria, suggesting it's trading at a discount relative to its fundamentals.

Frequently Asked Questions

What is the Graham Number and how is it used in value investing?

The Graham Number is a financial metric that estimates the maximum fair price an investor should pay for a stock, based on its earnings per share (EPS) and book value per share (BVPS). The formula — sqrt(22.5 × EPS × BVPS) — identifies fundamentally sound companies trading at a reasonable price, providing a 'margin of safety' against potential losses, per Benjamin Graham's philosophy.

Why does the Graham Number use a multiplier of 22.5?

The 22.5 multiplier derives from Benjamin Graham's original criteria that a stock's price-to-earnings (P/E) ratio should not exceed 15 and its price-to-book (P/B) ratio should not exceed 1.5. Multiplying these two maximums (15 × 1.5) gives 22.5, representing the maximum acceptable combined valuation for a defensive investor.

What is margin of safety and how does this calculator show it?

Margin of safety is the percentage difference between the Graham Number and the current stock price. If a stock's Graham Number is $31.75 and it trades at $25.00, the margin of safety is 21.3% — meaning the stock is priced 21.3% below its estimated fair value. Graham recommended at least a 20-30% margin before buying.

What are the limitations of relying solely on the Graham Number?

The Graham Number focuses purely on quantitative historical data, potentially overlooking qualitative factors like management quality, competitive advantages, or future growth prospects. It's less applicable to high-growth companies with low or negative book values and may not fully account for current market conditions or industry-specific nuances. It works best as one screening tool among many in a comprehensive analysis.

What does the Earnings Yield metric tell me?

Earnings yield is the inverse of the P/E ratio — it shows how much earnings you get per dollar invested at the Graham Number price. An earnings yield of 7.87% (as in the example with EPS $2.50 and Graham Number $31.75) exceeds Graham's 6.67% threshold, indicating the stock meets his earnings return criteria.