Benjamin Graham Number Stock Valuation Calculator
### Value Investing Principles: Benjamin Graham's Defensive Price Ceiling Developed by Benjamin Graham (the father of value investing and mentor to Warren Buffett), the Graham Number establishes the.
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💡 Practical Example
For example, evaluating a defensive value stock with EPS = $4.50, BVPS = $25.00, trading at $40.00 per share with a 20% required margin of safety: \. The current margin of safety is \. The stock trades at a 8.89x P/E and 1.60x P/B, qualifying as an undervalued defensive value buy.
📖 About Benjamin Graham Number Stock Valuation Calculator
Value Investing Principles: Benjamin Graham's Defensive Price Ceiling
Developed by Benjamin Graham (the father of value investing and mentor to Warren Buffett), the Graham Number establishes the maximum purchase price a defensive investor should pay for a mature industrial company.
The Derivation of the 22.5 Constant
Graham established two foundational guardrails for defensive equity investors:
- A company's P/E ratio should not exceed 15.0x.
- A company's P/B ratio should not exceed 1.5x.
Multiplying these two maximum valuation multiples yields: .
Setting .
How to Use This Calculator
Enter your Trailing 12-Month Earnings Per Share (EPS, ) (e.g. 4.50), Book Value Per Share (BVPS, ) (e.g. 25.00), Current Stock Market Share Price () (e.g. 40.00), and Required Margin of Safety (%) (e.g. 20.0). Results update instantly as you type — adjust any value to compare scenarios.
The Formula
Benjamin Graham classic value investing formulas (The Intelligent Investor): Number = √(22.5 × EPS × BVPS) of Safety (\%) = ((Graham Number - Market Share Price) / (Market Share Price)) × 100\% Defensive Buy Price = Graham Number × (1 - Required Margin of Safety) Product Rule: P/E × P/B = ((Price) / (EPS)) × ((Price) / (BVPS)) 22.5 (Where 15.0 × 1.5 = 22.5)
Worked Example
For example, evaluating a defensive value stock with EPS = 4.50, BVPS = 25.00, trading at 40.00 per share with a 20% required margin of safety: . The current margin of safety is . The stock trades at a 8.89x P/E and 1.60x P/B, qualifying as an undervalued defensive value buy.
Understanding Your Result
Evaluate your result in the context of your specific use case and relevant industry standards or reference values. A single calculated result is a starting point — test two to three scenarios to understand how sensitive the outcome is to your key input assumptions. For high-stakes decisions, verify your result against a secondary source or subject-matter expert before acting.
💡 Financial Planning: Expert Principles & Risk Awareness
- All calculations assume fixed rates and idealized conditions. Real-world results vary due to market volatility, inflation, fees, and taxes.
- The Consumer Financial Protection Bureau (CFPB) recommends consulting a certified financial planner (CFP) for decisions involving significant sums.
- Run at least three scenarios: optimistic, pessimistic, and most-likely — to understand the full range of potential outcomes before committing.
- Inflation averages 2–3% annually in the US (Federal Reserve target). Long-term projections that ignore inflation significantly overstate future purchasing power.
- Tax treatment varies widely by account type (IRA, 401k, brokerage), jurisdiction, and income level. Verify tax implications with a CPA before acting.
- Compound interest works for you in savings/investments and against you in debt. The difference of even 1% in rate, sustained over decades, is enormous.
- Emergency funds (3–6 months of expenses) should be established before optimizing for returns — financial security precedes financial growth.
- Financial projections older than 12 months should be recalculated. Interest rates, tax brackets, and market conditions shift materially year to year.
Results are for informational and educational purposes only. Always verify critical decisions with a qualified professional.