What does it mean if a stock's current price is below its Graham number?

If the current price is below the Graham number, the stock is considered undervalued according to Benjamin Graham's formula, suggesting it may be a good investment opportunity based on earnings and book value alone.

Can the Graham number be used for all types of companies?

The metric is most effective for stable, established companies with positive earnings and book values; it may be less meaningful for growth stocks, companies with negative earnings, or those with minimal book value.

How often should the Graham number be recalculated for a stock?

Since the Graham number depends on current earnings per share and book value per share, it should be recalculated whenever these fundamental metrics change, such as after quarterly earnings reports or significant balance sheet updates.

Is the Graham number the same as a discounted cash flow valuation?

No, the Graham number uses current earnings and book value to estimate intrinsic value, while discounted cash flow models project future cash flows and discount them back to present value, often requiring more assumptions about growth rates.

Investing & MarketsTool Review

Graham Number Calculator

Provided byOmni Calculatoromnicalculator.com

Our excellent Graham number calculator helps you find out the fair value of a stock bringing you the opportunity to f...

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About this tool

What Graham Number Calculator does

The Graham Number Calculator on Omni Calculator determines a stock's fair value using Benjamin Graham's intrinsic value formula, which combines a company's earnings per share and book value per share. Users input these metrics to receive a calculated Graham number that serves as a benchmark for identifying potentially undervalued or overvalued stocks. The tool outputs the Graham number, the current stock price, and a share result, allowing investors to quickly assess whether a stock is trading below or above its calculated intrinsic value. The site presents the formula in plain language, explaining that stocks trading below the Graham number are considered undervalued while those above are overvalued. It also notes that the fair value rises as earnings per share grow, linking the metric to retained earnings and shareholder equity. A chart visualizes the intrinsic value range against current stock prices to help users determine overvaluation or undervaluation status.

Step by step

How to use the Omni Calculator Graham Number Calculator

1
Input the company's book value per share into the designated field
2
Enter the earnings per share (EPS) for the same period
3
View the calculated Graham number displayed as the fair value benchmark
4
Compare the result to the stock's current market price to assess valuation
5
Use the 'Clear all' button to reset inputs for a new calculation

Is it right for you

Best for

Value investors and individual stock pickers who want a quick, formula-based benchmark to screen for potentially undervalued companies using readily available per-share financial data.

Limitations

Relies on static per-share inputs and does not account for future growth prospects or qualitative factors
Formula may be less effective for companies with negative earnings or very high book values
Provides a single calculated number rather than a comprehensive financial analysis

Questions

Graham Number Calculator FAQ

What does it mean if a stock's current price is below its Graham number?: If the current price is below the Graham number, the stock is considered undervalued according to Benjamin Graham's formula, suggesting it may be a good investment opportunity based on earnings and book value alone.
Can the Graham number be used for all types of companies?: The metric is most effective for stable, established companies with positive earnings and book values; it may be less meaningful for growth stocks, companies with negative earnings, or those with minimal book value.
How often should the Graham number be recalculated for a stock?: Since the Graham number depends on current earnings per share and book value per share, it should be recalculated whenever these fundamental metrics change, such as after quarterly earnings reports or significant balance sheet updates.
Is the Graham number the same as a discounted cash flow valuation?: No, the Graham number uses current earnings and book value to estimate intrinsic value, while discounted cash flow models project future cash flows and discount them back to present value, often requiring more assumptions about growth rates.

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Financial Toolset
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