Graham Number Calculator
The Graham Number is Benjamin Graham's back-of-envelope ceiling for what a defensive investor should pay: the geometric mean of a 15× earnings cap and a 1.5× book value cap — √(22.5 × EPS × book value per share). A stock below its Graham Number passes both of Graham's price tests simultaneously.
Enter EPS and book value per share (both in the company's filings, or on the MarketPing company page), plus the market price to see the discount or premium.
How it works
- Graham Number = √(22.5 × EPS × BVPS) — 22.5 encodes Graham's limits of P/E ≤ 15 and P/B ≤ 1.5 (their product ≤ 22.5).
- Price below the number = passing Graham's price screen; the gap is the margin in Graham's terms.
- Meaningless when EPS or book value is negative — the calculator flags loss-makers.
Frequently asked questions
Where does 22.5 come from?
Graham's twin rules for defensive investors: pay no more than 15× earnings and no more than 1.5× book value — but he allowed trading one off against the other as long as the PRODUCT stayed under 15 × 1.5 = 22.5. The square root converts that product cap into a per-share price.
When is the Graham Number useless?
For loss-making companies or negative book value (no real root), and for asset-light quality businesses — an IT services or FMCG compounder earning 40% ROE will always look 'expensive' on book value. Graham built the test for 1970s industrial balance sheets; treat it as a deep-value screen, not a universal fair value.
Is a stock below its Graham Number automatically a buy?
No — cheap-on-Graham often means the market doubts the E or the B: fading earnings, doubtful assets, governance risk. The number is a screening filter that earns the next hour of work (reading the filings), not a verdict that replaces it.
Should the 22.5 be adjusted for Indian markets?
Purists keep it — its conservatism is the feature. If you loosen it (some use P/E 20 × P/B 2 → 40), be explicit that you're paying up for growth and quality, which is precisely the case Graham designed the number to resist. Better: use it unmodified as your 'floor' estimate alongside a DCF.
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This tool is an educational estimate, not investment or tax advice. Rates and rules change — verify current figures and consult a professional before acting.