Benjamin Graham Stock Screener: How to Find Graham-Formula Stocks

April 6, 2026 · Stock Screening · 7 min read

Benjamin Graham is the father of value investing. Warren Buffett calls him his mentor. Every serious investor knows his name.

But most retail investors have never actually used his valuation formula. It's simple enough that you can calculate it on paper, but most financial apps don't teach it, and the screeners that exist don't make it easy to find Graham-formula stocks.

Here's what the Graham Number is, how it works, why Graham developed it, and how to screen for stocks that meet his criteria.

The Graham Number Formula

Benjamin Graham's valuation formula is elegantly simple:

Graham Number = v(22.5 — EPS — Book Value Per Share)

Where:

22.5 is a constant representing the intersection of a 15x P/E multiple and a 1.5x Price-to-Book multiple that Graham considered reasonable for a "growth at a reasonable price" stock
EPS is the company's trailing 12-month earnings per share
Book Value Per Share is total shareholder equity divided by shares outstanding

Example

Let's say a company has:

Earnings per share: $2.50
Book value per share: $15.00

Graham Number = v(22.5 — 2.50 × 15.00) Graham Number = v(843.75) Graham Number = $29.05

If this stock is trading at $25, it's trading below the Graham Number — potentially attractive by Graham's criteria. If it's trading at $35, it's above the Graham Number — less attractive.

What the Graham Number Screens For

The Graham formula is designed to find undervalued, asset-backed companies with reasonable profitability.

1. Profitability (The EPS Component)

The EPS in the formula ensures you're only looking at companies that are actually earning money. Graham had no interest in unprofitable speculations. A company must generate earnings.

But Graham didn't demand explosive growth. He was looking for stability and reasonable earnings, not for the next Amazon.

2. Asset Backing (The Book Value Component)

The book value per share component screens for companies with tangible net assets. Graham believed that if a company had significant asset value on the balance sheet, the downside was protected — even if the business deteriorated, the assets could be liquidated.

This approach made sense in Graham's era (1940s–1950s) when most asset value on balance sheets was real — factories, inventory, cash. It's less reliable now for tech or service companies where most value is intangible.

3. Conservative Valuation (The 22.5 Constant)

The 22.5 constant bakes in a conservative valuation assumption: you're looking for stocks that meet both a reasonable P/E multiple (15x) and a reasonable Price-to-Book multiple (1.5x).

A stock might pass the EPS test (profitable) and the book value test (asset-backed) but still be trading at 50x earnings or 5x book value. The Graham formula screens those out.

What the Graham Number Doesn't Capture

The Graham formula is powerful in what it does — finding asset-backed, modestly valued, profitable companies. But it's limited in what it doesn't:

1. Quality of Earnings

Graham's formula doesn't distinguish between $1 of cash-based earnings and $1 of accounting-based earnings. A company might report $2.50 in EPS but burn through cash. The formula doesn't see it.

Use free cash flow alongside the Graham Number to verify that earnings are real.

2. Growth Prospects

Graham was explicitly looking for "growth at a reasonable price," but the formula doesn't reward high growth. A company growing revenue at 30% per year will look no different from one growing at 3%.

If you're looking for growth at reasonable valuation, you need to layer on growth metrics — revenue growth, margin expansion, competitive advantage.

3. Industry Dynamics

The Graham Number doesn't care if you're screening for a company in a thriving industry or one in secular decline. It will surface a cheap semiconductor company and a cheap coal producer with equal enthusiasm.

Use industry trends as a filter. A Graham-formula stock in a collapsing industry is often a value trap.

4. Balance Sheet Quality

Graham cared about asset value, but not all assets are created equal. A company with $20 per share in inventory (which can expire, go obsolete, or become unsellable) is not the same as one with $20 per share in cash and receivables.

Dig into the balance sheet composition before trusting the book value.

How to Screen for Graham-Formula Stocks

Step 1: Calculate the Graham Number

For each stock, compute:

Graham Number = v(22.5 — EPS — Book Value Per Share)

Step 2: Find Stocks Trading Below the Graham Number

Filter for stocks where:

Current Price < Graham Number

This is your primary screen. Stocks trading below Graham's formula are, by his definition, undervalued.

Step 3: Layer In Safety Filters

Don't stop at the Graham Number. Add:

Financial Health:

Current ratio > 1.5 (can cover short-term liabilities)
Debt-to-equity < 1.0 (not over-leveraged)
Free cash flow positive (earnings are real)

Quality of Valuation:

P/E ratio < 15 (reasonable profitability valuation)
Price-to-Book < 1.5 (not paying too much for assets)
Price-to-Free-Cash-Flow < 15 (cash-based valuation check)

Margin of Safety:

Trading at > 15% discount to Graham Number
Trading at > 20% discount to blended fair value (using multiple methods, not just Graham — see Stock Intrinsic Value Calculator for a multi-method framework)

Step 4: Review the Industry

Graham-formula stocks in dying industries are often traps. Check:

Is revenue in the industry growing or shrinking?
Is the company gaining or losing market share?
Are competitive advantages sustainable or eroding?

Step 5: Make a Decision

After screening, you have a list of candidates. For each one:

Verify the earnings quality (free cash flow check)
Understand why the discount exists (temporary headwinds vs. structural decline)
Assess the margin of safety relative to your risk tolerance
Decide whether to research further or move on

How Equity Rank Extends Graham's Approach

The Graham Number is foundational, but modern screening requires more. Equity Rank builds on Graham's framework with:

19 valuation methods — Graham relied on P/E and Price-to-Book. We blend eight methods (including DCF, EV/EBITDA, and free cash flow yield) to reduce reliance on any single metric.

Market Sentiment Overlay — Graham had no way to measure what the market was currently thinking. The SAVE score captures whether a stock is improving or declining in investor attention and perception — a leading indicator of price movement.

Innovation Scoring — Graham cared about asset backing. We also measure long-run competitive position through R&D intensity, capital expenditure discipline, and patent activity relative to peers — capturing whether the business is building for the future.

Real-Time Screening — Graham's formulas required weeks of manual calculation. Equity Rank updates fair value daily for 500+ stocks, so you can identify new opportunities as they emerge.

You can screen for Graham-formula stocks directly in Equity Rank — filtering for stocks trading below the Graham Number and below our multi-method fair value estimate, with positive margin of safety and improving sentiment.

The Graham formula is a starting point. Modern data and methodology extend it in ways Graham himself would have welcomed.

Screen for value stocks at Equity Rank

For informational purposes only. Not financial advice. The Graham formula is one valuation approach among many. Always conduct your own research and consult a financial professional before making investment decisions.