Calculate the Graham Number from EPS and book value per share, compare it with the current market price.
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Result
Graham Number — the classic maximum price a defensive investor should pay if they want both a P/E of 15 or less and a P/B of 1.5 or less.
Earnings cap at 15× EPS
$90.00
The current market price still fits Graham’s earnings limit.
Book-value cap at 1.5× BVPS
$60.00
The current market price still fits Graham’s book-value limit.
How to read this result
On these inputs, Graham’s combined defensive cap is $73.48 per share versus a current market price of $58.00. That leaves a valuation gap of $15.48 and an upside-to-Graham figure of 26.7% if the stock were merely to trade back to the classic Graham ceiling.
The tighter limit here comes from the book-value side, because the 1.5× BVPS cap is lower than the 15× EPS cap.
That makes this page more useful than a bare Graham Number alone: you can see whether the stock fails on earnings discipline, balance-sheet discipline, or both before using the figure as a value screen.
Value Investing
The Graham Number is a conservative estimate of the maximum price a defensive investor should pay for a stock, based on Benjamin Graham's criteria from The Intelligent Investor. It combines earnings per share and book value per share into a single fair-value figure.
Graham believed that a defensive investor should not pay more than 15× earnings (P/E ≤ 15) or more than 1.5× book value (P/B ≤ 1.5). The Graham Number combines both constraints: √(22.5 × EPS × BVPS), where 22.5 = 15 × 1.5.
If the stock trades below the Graham Number, it may be undervalued by Graham's conservative criteria. If above, it fails at least one of his price tests.
The square root of the product of 22.5, EPS, and book value. This graham number formula explanation shows how the entered values flow into the main result and the supporting figures the calculator returns.
Graham Number = √(22.5 × EPS × Book Value Per Share)
22.5 = 15 (max P/E) × 1.5 (max P/B). Both EPS and BVPS must be positive.
A company has EPS of 6 and book value of 40 per share. Graham Number = √(22.5 × 6 × 40) = √5400 ≈ 73.48. If the stock trades below 73.48, it passes Graham's test. The example section should make the workflow concrete, so this page keeps the arithmetic tied to a plausible scenario rather than leaving the result as an abstract formula.
A Graham Number calculator becomes much more useful when it compares the formula result with the current market price. The raw square-root figure tells you the defensive ceiling, but it does not tell you whether the stock is trading 5% below that ceiling or 30% below it. Those are very different situations for a value investor thinking about margin of safety.
That is why this page now asks for the current market price as a core input rather than leaving the comparison as homework. The result can then show the discount or premium to the Graham Number, the dollar gap, and the share of the Graham ceiling already reflected in the quote. A stock near its Graham Number may still be acceptable by classic criteria, but it leaves far less room for accounting disappointments, cyclical earnings pressure, or book-value write-downs.
The Graham Number is compact because it bundles two limits together, but a better Graham fair value calculator should still show the separate caps behind it. Graham's original discipline was not only a square-root formula. It was a refusal to pay more than 15 times earnings or more than 1.5 times book value for a defensive purchase.
Looking at those caps separately shows what is really constraining the stock. Sometimes the earnings side is tight because profits are thin relative to the share price. In other cases the book-value side is tighter because the balance sheet does not support the quote. Seeing which side breaks first is more actionable than looking at one fair-value number in isolation.
Designed for mature, profitable companies with tangible assets. Not suitable for growth stocks, loss-making firms, or asset-light businesses. The 15× P/E and 1.5× P/B thresholds reflect 1970s market conditions and may be conservative for today's market.
The formula assumes that reported earnings and reported book value are both economically meaningful. That is not always true. Commodity producers, lenders, insurers, and industrial businesses can all show earnings and book values that move sharply with the cycle. A low Graham Number discount may disappear quickly if profits revert downward or if assets need to be written down.
It is even less reliable for software, platform, brand-heavy, or other asset-light businesses whose value comes from intangible assets that traditional book value does not fully capture. In those cases a Benjamin Graham calculator can reject almost every company in the sector without proving they are all overvalued. That is a limitation of the method, not proof that the whole market is irrational.
The Graham Number is a conservative screening shortcut, not a full intrinsic value model. A discounted-cash-flow or earnings-growth model can justify a higher or lower value depending on growth, reinvestment, capital intensity, and risk. Graham's method intentionally avoids that complexity in exchange for a stricter purchase discipline.
That is why many investors use the Graham Number as an early filter and then move to a deeper intrinsic value estimate, margin-of-safety check, and business-quality review. Passing the Graham screen does not make a stock automatically cheap. Failing it does not automatically make the stock uninvestable. It simply tells you whether the current price clears Graham's classic defensive threshold.
Frequently asked questions
22.5 = 15 × 1.5. Graham recommended a maximum P/E of 15 and maximum P/B of 1.5 for defensive investors. The Graham Number enforces both constraints simultaneously.
Generally no. Tech companies often have high P/E ratios, minimal book value, and derive most value from intangible assets. The Graham Number would reject almost all tech stocks, which was not Graham's intent — he designed it for industrial and financial companies.
The concept of buying below fair value remains timeless. However, the specific thresholds (P/E ≤ 15, P/B ≤ 1.5) are conservative by modern standards. Many value investors use the Graham Number as one screening tool among several.
The formula requires both to be positive. Negative earnings or negative book value make the Graham Number undefined — and the company would not qualify as a Graham-style defensive investment regardless.
There is no universal cutoff, but the practical idea is that a stock trading only a few percent below the Graham Number has a much thinner cushion than one trading 20% or 30% below it. The useful question is not only whether the share price is below the Graham Number, but whether the discount is large enough to absorb estimation error, cyclical earnings weakness, or weaker-than-expected asset quality.
Because the square-root formula can hide what is actually driving the limit. A stock might fail mainly because the market price is too high relative to earnings, too high relative to book value, or both. Showing the separate 15× EPS cap and 1.5× BVPS cap makes the screen easier to interpret.
Often yes, especially when goodwill and acquired intangibles are large. Graham's method is most comfortable with tangible, balance-sheet-backed businesses, so some investors substitute tangible book value per share to make the screen more conservative. The right choice depends on the business and how meaningful reported book value really is.
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