🧠 Introduction
When it comes to value investing, few names carry as much respect as Benjamin Graham — the mentor of Warren Buffett. One of Graham’s timeless ideas is the “Graham Number”, a simple formula that estimates a stock’s fair value based on two core fundamentals:
Earnings Per Share (EPS) and Book Value Per Share (BVPS).
Our Graham Number Calculator makes this process effortless.
Just enter EPS and BVPS — and you’ll instantly see whether the stock appears undervalued, fairly valued, or overvalued based on conservative investing principles.
💡 What Is the Graham Number?
The Graham Number represents the maximum fair price a conservative investor should pay for a stock, according to Benjamin Graham’s classic valuation model.
It’s built on the idea that a stock’s value should reflect both:
-
Its earnings power (EPS), and
-
Its underlying assets (Book Value per Share).
To strike a balance between growth and safety, Graham combined reasonable valuation limits:
-
A P/E ratio ≤ 15, and
-
A P/B ratio ≤ 1.5
Multiplying 15 × 1.5 = 22.5, which forms the basis of the formula.
🧮 Graham Number Formula
The formula is:
Where:
-
EPS = Earnings Per Share
-
BVPS = Book Value Per Share
22.5 is derived from Graham’s acceptable P/E (15) and P/B (1.5) multiples.
This equation gives a theoretical fair value, assuming a company is reasonably priced on both profit and assets.
🧾 Example Calculation
Let’s take a simple example:
Parameter |
Value |
Explanation |
|---|---|---|
Earnings Per Share (EPS) |
₹22 |
Company’s profit per share |
Book Value Per Share (BVPS) |
₹110 |
Shareholder equity per share |
Market Price |
₹452 |
Current trading price |
Now,
Graham Number = √(22.5 × 22 × 110) = √54,450 = ₹233.35
-
Graham Number (Fair Price): ₹233.35
-
Market Price: ₹452
Since the market price is nearly 48% above the Graham Number, the stock appears 🔴 Overvalued.
⚙️ How To Use the Graham Number Calculator
Our calculator is designed for simplicity and accuracy.
Input |
Description |
Example |
|---|---|---|
Earnings Per Share (EPS) |
Company’s net profit divided by total shares |
₹22 |
Book Value Per Share (BVPS) |
(Total Assets – Total Liabilities) ÷ Shares |
₹110 |
Current Market Price (₹) (optional) |
Helps you compare actual vs fair value |
₹452 |
Once you click “Calculate”, you’ll get:
-
Graham Number (Fair Price)
-
Verdict (Buy / Hold / Sell)
-
% Difference vs Market
-
Color-coded interpretation (🟢 Undervalued / 🟡 Fair / 🔴 Overvalued)
Understanding the Inputs and Outputs of the Graham Number Calculator
The Graham Number Calculator helps investors find a stock’s conservative fair price using Benjamin Graham’s classic formula.
Before using the tool, review this table to understand what each input and output means with examples:
Field |
Description |
Example |
|---|---|---|
Earnings Per Share (EPS) |
The company’s net profit per outstanding share. It shows how much profit the company makes for each share. |
₹22 — If a company earns ₹220 crore and has 10 crore shares, EPS = ₹22. |
Book Value Per Share (BVPS) |
The per-share value of the company’s net assets. It represents the company’s intrinsic worth based on accounting value. |
₹110 — If total equity = ₹1100 crore and 10 crore shares exist, BVPS = ₹110. |
Current Market Price (₹) |
This is optional. Enter the stock’s latest market price to compare with its Graham fair value. |
₹452 — The stock is currently trading at ₹452 per share. |
Benjamin Graham assumed a maximum acceptable P/E of 15 when determining fair value. |
15 (constant assumption) |
|
P/B Ratio (Implied) |
Graham also assumed an ideal Price-to-Book ratio of 1.5 for conservative valuation. |
1.5 (constant assumption) |
Graham Number (Fair Price) |
The theoretical maximum fair value of a stock based on Graham’s formula: √(22.5 × EPS × BVPS). It combines earnings and asset value. |
₹233.35 — Calculated using EPS = ₹22 and BVPS = ₹110. |
Valuation Verdict |
Compares the market price to the Graham Number: 🟢 < 90% → Undervalued (Buy) 🟡 90–110% → Fairly Valued (Hold) 🔴 > 110% → Overvalued (Sell) |
🔴 Overvalued — Current Price ₹452 > Fair Price ₹233.35. |
Difference (Graham vs Market) |
Shows how much higher or lower the current market price is compared to the Graham fair value. |
48.37% above Graham Number — stock appears expensive. |
💡 Tip: The Graham Number provides a conservative estimate — it’s best used as a reference point along with other valuation tools like the Reverse DCF Calculator or PEG Ratio Calculator.
So go ahead now and checkout your stock fair valuation by using the below Graham Number Calculator
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Some other related tools
P/E Ratio Calculator – Check if a Stock is Overvalued or Undervalued
Advanced Target Price Calculator – Estimate Future Stock Value & CAGR Online
Intrinsic Value (DCF) Calculator – Find a Stock’s True Worth
Reverse DCF (Implied Growth) Calculator – Find Market’s Expected Growth Rate
PEG Ratio Calculator – Find Fair Value of Stocks Online
📊 How To Interpret Graham Number Results
Condition |
Market vs Graham Number |
Valuation Verdict |
Action |
|---|---|---|---|
Market Price < 90% of Graham |
🟢 Undervalued |
Buy / Accumulate |
|
90% ≤ Price ≤ 110% |
🟡 Fair Value |
Hold |
|
Market Price > 110% |
🔴 Overvalued |
Avoid / Sell |
🧩 Example:
-
Graham Number = ₹233.35
-
Market Price = ₹452
→ 452 is 48% higher than 233 → Overvalued
💬 Why the Graham Number Matters
The Graham Number gives investors:
-
A quick fair value estimate without complex models.
-
A margin of safety — a cornerstone of value investing.
-
A rational benchmark against market euphoria.
It helps you avoid overpaying for popular stocks and focus on financially solid, reasonably priced companies.
🧱 Components Explained — EPS and BVPS
1️⃣ Earnings Per Share (EPS)
EPS = Net Profit ÷ Total Shares
It shows how much profit each share earns.
Higher EPS → more profitable company → higher Graham Number.
2️⃣ Book Value Per Share (BVPS)
BVPS = (Total Assets – Liabilities) ÷ Shares Outstanding
It measures a company’s intrinsic asset backing.
Higher BVPS → more asset-rich → safer value base.
Together, they balance profitability and financial strength in one metric.
💰 Why Value Investors Use Graham Number
Benjamin Graham believed in:
“Buying a stock only when it’s priced below its intrinsic value.”
That’s exactly what this formula achieves — a conservative fair price that factors both earnings and book value.
It helps:
-
Identify undervalued stocks
-
Avoid speculative bubbles
-
Focus on quality businesses at reasonable prices
⚠️ Limitations of the Graham Number
While effective, the Graham Number isn’t perfect.
Limitation |
Explanation |
|---|---|
❌ Not for loss-making companies |
Negative EPS makes formula invalid |
❌ Doesn’t consider growth |
Ignores future potential |
❌ Not suitable for banks or NBFCs |
Their balance sheets differ |
❌ Outdated for intangible-heavy firms |
Doesn’t account for brands, patents, etc. |
That’s why investors combine it with tools like the PEG Ratio or Reverse DCF for better accuracy.
🔄 Combine Graham Number With Other Valuation Tools
Tool Name |
Purpose |
Best For |
|---|---|---|
Values company based on future cash flows |
Growth stocks |
|
Evaluates price vs growth rate |
Moderate-growth stocks |
|
Fundamental fair value estimate |
Long-term investing |
|
Graham Number Calculator |
Conservative fair price |
Defensive value investors |
This combined approach gives a 360° view of valuation.
💡 Pro Tips for Using the Graham Number Effectively
-
✅ Use 5-year average EPS for more stability
-
✅ Ensure latest financial data (annual report)
-
✅ Cross-check with industry peers
-
✅ Prefer companies with positive EPS & BVPS
-
✅ Treat the result as a guide, not a target price
🧩 FAQs About Graham Number Calculator
1. What is the Graham Number used for?
It estimates the maximum fair price a value investor should pay for a stock, based on earnings and book value.
2. What if EPS is negative?
The formula becomes invalid. A negative EPS indicates losses — such stocks fail Graham’s safety criteria.
3. Is the Graham Number applicable to Indian stocks?
Yes ✅ — it works for Indian companies with stable earnings and tangible assets.
4. Is a lower Graham Number bad?
Not necessarily. It may just mean the stock’s earnings or book value are modest relative to peers.
5. What does it mean if Market Price < Graham Number?
That’s generally a positive sign — the stock may be undervalued, offering a potential buying opportunity.
6. Can Graham Number be used for startups or tech stocks?
Not ideally. These companies often have high growth and low book value, making the metric less reliable.
🏁 Conclusion
The Graham Number Calculator is one of the simplest and most effective valuation tools for defensive, long-term investors. It offers a quick fair value estimate grounded in Benjamin Graham’s time-tested principles — balancing earnings power and asset safety.
If the market price is below the Graham Number, it could signal a margin of safety — the holy grail of value investing.
But remember, valuation is only one part of the puzzle. Combine it with business quality, management integrity, and industry trends for smarter investing.
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⚖️ Disclaimer
This calculator and article are for educational and informational purposes only. They do not constitute financial, investment, or trading advice.
Always perform your own due diligence or consult a qualified financial advisor before making any investment decisions.
