Graham Number Calculator
Calculate Benjamin Graham's maximum fair price for any stock using the formula √(22.5 × EPS × BVPS). Enter earnings per share and book value per share to find the Graham Number, discount to current price, and the implied P/E × P/B check.
Use normalized EPS for cyclical companies.
Total equity minus preferred equity ÷ shares.
Enter stock price, EPS, and book value per share to calculate the Graham Number.
Sector applicability guide
The Graham Number is most reliable for asset-heavy businesses with stable, positive earnings. It loses accuracy for technology, biotech, and growth companies where intangible assets make up most of the company's value.
| Sector | Applicability | Reason |
|---|---|---|
| Financials (Banks / Insurance) | High | Balance sheet assets are close to market value; BVPS is reliable |
| Utilities | High | Regulated assets + stable earnings; Graham formula works well |
| Industrials | Moderate–High | Tangible assets; EPS cyclicality requires multi-year average |
| Energy | Moderate | Commodity cycles compress EPS; use normalized earnings |
| Materials | Moderate | Capital-intensive; BVPS meaningful, but EPS volatile |
| Consumer Staples | Moderate | Stable earnings; intangible brands not in BVPS |
| Real Estate (REITs) | Low–Moderate | Use NAV and FFO instead of EPS + BVPS for REITs |
| Consumer Discretionary | Low–Moderate | Cyclical earnings and high intangibles reduce reliability |
| Health Care / Biotech | Low | R&D pipeline value not in book; EPS erratic for early-stage firms |
| Communication Services | Low | Subscriber and IP value absent from balance sheet |
| Technology | Low | Intangible-heavy; BVPS often understates true asset base |
Applicability is a general guide, not a strict rule. Always evaluate alongside sector context and multiple valuation methods.
Formula reference
The exact formula this calculator uses to compute Graham Number.
Graham Number = √( 22.5 × EPS × BVPS )EPSTrailing 12-month earnings per shareBVPSBook value per share- A conservative fair-value ceiling combining earnings and assets.
- The 22.5 multiplier is Graham’s max acceptable P/E (15) × max acceptable P/B (1.5).
- Requires positive EPS and book value; best for stable, profitable, tangible-asset companies.
Educational reference only — not investment advice. See the glossary for plain-English definitions of each term.
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Frequently asked questions
Common questions about the Graham Number and Benjamin Graham's value investing criteria.
The Graham Number is a valuation formula developed by Benjamin Graham, the father of value investing. It estimates the maximum price a defensive investor should pay for a stock: √(22.5 × EPS × BVPS). The 22.5 multiplier comes from Graham's rule that a stock's P/E ratio should not exceed 15 and its price-to-book ratio should not exceed 1.5 — and 15 × 1.5 = 22.5. Stocks trading significantly below their Graham Number may correspond to potential undervaluation on Graham's criteria.
Graham Number = √(22.5 × EPS × BVPS), where EPS is trailing twelve-month earnings per share and BVPS is book value per share (total equity minus preferred equity, divided by shares outstanding). For example, a stock with EPS of $5.00 and BVPS of $30.00 has a Graham Number of √(22.5 × 5 × 30) = √3,375 ≈ $58.09.
A stock trading below its Graham Number satisfies Graham's dual condition on valuation: it implies P/E × P/B ≤ 22.5, which Graham considered a margin-of-safety threshold. A large discount to the Graham Number may correspond to undervaluation on these criteria. However, it is not a guarantee — some stocks trade below their Graham Number because earnings or book value are temporarily distorted or declining.
The Graham Number was designed for "defensive investors" screening for stable, asset-backed businesses. It is unreliable for technology and growth companies where intangible assets dominate, biotech firms with erratic earnings, REITs (use FFO and NAV instead), and any company with negative EPS or BVPS (the formula produces no real result). Always use the Graham Number as one input in a multi-method valuation — never in isolation.
Graham himself preferred using average earnings over 5–10 years to smooth out cyclical swings (what he called "normalized" or "average" earnings). Using trailing twelve-month EPS is common today, but for cyclical businesses (energy, industrials, materials) a multi-year average produces a more stable Graham Number. Using a single low-EPS year from a recession can make a fundamentally sound company appear overvalued.
Equity Rank's consensus fair value blends 8–15 valuation methods per stock, including the Graham Number, DCF, Price-to-Book, EV/EBITDA, and sector-adjusted multiples. For asset-heavy, earnings-stable sectors (financials, utilities, industrials), the Graham Number receives meaningful weight. For high-growth and intangible-heavy sectors, growth-based methods like DCF and PEG receive more weight. The result is a sector-calibrated consensus estimate.
Not reliably. Graham designed this formula for defensive, asset-backed businesses with stable earnings. For growth stocks, the formula tends to produce a very low Graham Number relative to the market price — not because the stock is overvalued, but because the formula ignores future earnings power. For growth companies, DCF and PEG ratio analysis are more appropriate tools.
This tool is for research and educational purposes only. It does not constitute financial advice. The Graham Number is a screening tool developed for defensive investors in a different market era — it does not account for growth, intangible assets, or modern business models. Results depend entirely on user-provided inputs; verify EPS and BVPS from the company's financial statements. Equity Rank is not a registered investment adviser. Consult a qualified financial professional before making investment decisions.
Go deeper: multi-method valuation
The Graham Number is one lens. Pair it with DCF, margin of safety, and book value analysis for a complete picture — especially for defensive value screening.
Learn more about how Equity Rank weights these models in the methodology or browse the full free tool directory. Still have questions? See the FAQ.
Read the method behind this calculator
Each explainer walks through the formula, the inputs it needs, and the cases where it stops being informative.
More write-ups in the blog, or see how the models are weighted in the methodology.