What does a Graham Number lower than the stock price mean?

It means the stock trades above Benjamin Graham's conservative fair-value estimate, suggesting the price is not a bargain by his standards. It does not necessarily mean the stock is a bad investment, only that it fails the Graham screen.

Can I use trailing twelve-month (TTM) EPS?

Yes. TTM EPS is the most common input. Some analysts use a 3-to-5-year average EPS to smooth cyclical swings, which tends to produce a more conservative number.

Why is the multiplier 22.5 specifically?

Graham considered a P/E above 15 and a P/B above 1.5 too expensive for a defensive investor. Multiplied together, 15 x 1.5 = 22.5, so the formula encodes both limits simultaneously.

Intrinsic Value Calculator (Graham Number)

Estimate the intrinsic value of a stock using the Benjamin Graham Number formula. Enter earnings per share and book value per share to find a conservative fair-value estimate.

By AbraCalc Editorial Team · Reviewed by AbraCalc Methodology Review · Last reviewed: 2026-06-25

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How to use this tool

Enter earnings per share (eps) and book value per share (bvps) in the fields above.
Results update instantly as you type — or click Calculate.
Read your graham number (intrinsic value) and the full breakdown beneath it.

⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.

Formula

Graham Number = √(22.5 × EPS × BVPS)

Where 22.5 reflects Graham's maximum acceptable P/E of 15 × maximum P/B of 1.5 (15 × 1.5 = 22.5).

How it works

The Graham Number, developed by Benjamin Graham in The Intelligent Investor, provides a conservative upper-bound estimate of a stock's fair value using only earnings and book value. A stock trading below its Graham Number is considered potentially undervalued by Graham's criteria. This formula assumes the stock should not trade above 15 times earnings and 1.5 times book value simultaneously.

Worked example

Valuing a Stock with EPS of $5 and BVPS of $40

EPS = $5.00, Book Value Per Share = $40.00
Multiply: 22.5 × $5.00 × $40.00 = 22.5 × $200 = $4,500
Take the square root: √$4,500 = $67.08
Compare to the current market price: if the stock trades below $67.08, it may be undervalued by Graham's criteria

Graham Number = $67.08. The implied max P/E is 13.42x and implied max P/B is 1.68x.

Common mistakes to avoid

Using diluted EPS instead of basic EPS inflates shares and understates the Graham Number.
Plugging in negative EPS or BVPS — the square root becomes undefined; Graham intended this formula only for profitable, asset-backed companies.
Treating the Graham Number as a precise buy price rather than a conservative upper bound; Graham himself called it a rough screen, not a valuation model.

Key terms

What is the Graham Number?: A formula by Benjamin Graham that estimates the maximum fair price for a stock based on earnings per share and book value per share, using the constant 22.5 (15 × 1.5).
What is EPS?: Earnings Per Share (EPS) is a company's net profit divided by the number of outstanding common shares. It indicates how much profit is attributable to each share.
What is BVPS?: Book Value Per Share (BVPS) is the net asset value of a company divided by its shares outstanding. It represents the per-share accounting value of equity.
Is the Graham Number still relevant today?: The Graham Number is a conservative, fundamental screening tool developed in the 1950s. It works best as one of several filters for identifying potentially undervalued stocks, not as a standalone valuation method.

Frequently asked questions

What does a Graham Number lower than the stock price mean?: It means the stock trades above Benjamin Graham's conservative fair-value estimate, suggesting the price is not a bargain by his standards. It does not necessarily mean the stock is a bad investment, only that it fails the Graham screen.
Can I use trailing twelve-month (TTM) EPS?: Yes. TTM EPS is the most common input. Some analysts use a 3-to-5-year average EPS to smooth cyclical swings, which tends to produce a more conservative number.
Why is the multiplier 22.5 specifically?: Graham considered a P/E above 15 and a P/B above 1.5 too expensive for a defensive investor. Multiplied together, 15 x 1.5 = 22.5, so the formula encodes both limits simultaneously.