Graham Number Calculator

What Is the Graham Number?

The Graham Number is a formula developed by Benjamin Graham — the father of value investing and Warren Buffett's teacher at Columbia Business School — to estimate the maximum price a defensive, risk-averse investor should reasonably pay for a stock. It combines two fundamental measures of a company's worth: its earnings and its book value (net assets).

The formula is: Graham Number = √(22.5 × EPS × Book Value Per Share). The constant 22.5 comes from Graham's own guidelines: he believed a sound investment should not trade above 15 times earnings or 1.5 times book value, and 15 × 1.5 = 22.5. Multiplying these together and taking the square root produces a single blended estimate of fair value.

How to Use This Calculator

Enter the company's trailing twelve-month EPS (earnings per share, found on any financial data site or the company's income statement) and its Book Value Per Share (total shareholder equity divided by shares outstanding, found on the balance sheet). Optionally add the current share price to see immediately whether the stock is trading above or below its Graham Number.

Limitations to Keep in Mind

The Graham Number only works for profitable companies with positive book value — it cannot be calculated for companies with negative earnings or negative equity. It also was designed in an era before today's asset-light, high-growth technology companies were common, so it tends to systematically undervalue businesses whose worth lies mostly in intangibles (brand, software, network effects) rather than physical assets and current earnings. It's best used as one data point among several, particularly for capital-intensive, established businesses — not as a sole buy/sell signal.

Frequently Asked Questions

Is a stock automatically a "buy" if it trades below its Graham Number?

Not automatically. The Graham Number is a rough screening tool, not a complete valuation. A low Graham Number relative to price can also reflect real business problems the market has correctly priced in. Always investigate why a stock looks cheap before buying.

Does the Graham Number work for all industries?

It works best for stable, asset-heavy, profitable businesses — industrials, financials, consumer staples. It is far less reliable for early-stage growth companies, biotech, or asset-light software businesses where book value understates true worth.

What did Graham consider a good margin of safety versus the Graham Number?

Graham generally advocated buying meaningfully below his calculated fair value estimate — many value investors use a 20–50% discount as a starting margin of safety, which you can check directly with our Margin of Safety Calculator.