Benjamin Graham's intrinsic-value estimate: the Graham Number from EPS and book value per share, with margin of safety against the current price.
Graham Number (intrinsic value estimate)
How to use this tool
Earnings per share, usually trailing twelve months, from the company's reports.
Shareholders' equity divided by shares outstanding.
To see margin of safety and whether price sits below the Graham Number.
Use it to shortlist candidates for deeper research, never as a buy signal alone.
Formula & worked example
EPS of $3.00 and book value per share of $20.00 give a Graham Number of sqrt(22.5 × 3 × 20) = $36.74. Against a $30.00 share price that is a margin of safety of 18.3% — below the Graham Number on this measure.
Limitations — read this before you rely on it
Value-investing caveats, stated plainly: the Graham Number is a conservative screening formula from 'The Intelligent Investor' era, not a modern valuation. It is meaningless for companies with negative EPS or BVPS, penalises asset-light and high-growth businesses, ignores debt quality, moats and future growth, and uses backward-looking EPS and book value. Never buy on this number alone.
Frequently asked questions
The father of value investing and Warren Buffett's mentor. The Graham Number comes from his screening rules in 'The Intelligent Investor' for finding shares trading below a conservative estimate of worth.
Graham capped a fair P/E at 15 and a fair price-to-book at 1.5. Multiplying the two ceilings gives 22.5, so the formula blends an earnings view and an asset view into one number.
The discount of price to estimated value. Graham insisted on buying with a margin of safety so that errors in the estimate do not become losses — a larger margin means more room to be wrong.
For loss-making companies (negative EPS), asset-light businesses (low book value despite strong earnings), and fast growers whose value lies in future growth the formula ignores.
Not by itself. It is a screen for further research: check debt, earnings quality, dividends, management and why the market prices it low before deciding anything.