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Graham Number Calculator

Calculate the Graham Number — Benjamin Graham's maximum fair price for a defensive stock based on EPS and Book Value per Share. A cornerstone of value investing pioneered by Warren Buffett's mentor.

Reviewed by Christopher FloiedUpdated

This free online graham number calculator provides instant results with no signup required. All calculations run directly in your browser — your data is never sent to a server. Enter your values below and see results update in real time as you type. Perfect for everyday calculations, homework, or professional use.

How to Use This Calculator

1

Enter your input values

Fill in all required input fields for the Graham Number Calculator. Most fields include unit selectors so you can work in your preferred unit system — metric or imperial, whichever matches your problem.

2

Review your inputs

Double-check that all values are correct and that you have selected the right units for each field. Incorrect units are the most common source of calculation errors and can produce results that are off by factors of 2, 10, or more.

3

Read the results

The Graham Number Calculator instantly computes the output and displays results with units clearly labeled. All calculations happen in your browser — no loading time and no data sent to a server.

4

Explore parameter sensitivity

Try adjusting individual input values to see how the output changes. This is a quick and effective way to develop intuition about how different parameters influence the result and to identify which inputs have the largest effect.

Formula Reference

Graham Number Calculator Formula

See calculator inputs for the governing equation

Variables: All variables and their units are labeled in the calculator interface above. Input fields accept values in multiple unit systems — select your preferred unit from the dropdown next to each field.

When to Use This Calculator

  • •Use the Graham Number Calculator when comparing financial options side-by-side — such as different loan terms or investment returns — to make more informed decisions.
  • •Use it to quickly estimate costs or returns before making purchasing, investment, or borrowing decisions.
  • •Use it for financial education and planning to understand how compound interest, fees, or tax affects the real value of money over time.
  • •Use it when building or reviewing a budget to verify that projections and calculations are mathematically correct.

About This Calculator

The Graham Number Calculator is a free financial calculation tool designed to help individuals and businesses understand key financial concepts and estimate costs, returns, and loan parameters. Calculate the Graham Number — Benjamin Graham's maximum fair price for a defensive stock based on EPS and Book Value per Share. A cornerstone of value investing pioneered by Warren Buffett's mentor. The calculations are based on standard financial mathematics formulas. Results are for informational and educational purposes only and should not be considered financial, investment, or tax advice. Consult a qualified financial professional before making financial decisions. All calculations are performed in your browser — no personal financial data is stored or transmitted.

About Graham Number Calculator

The Graham Number Calculator computes Benjamin Graham's formula for the maximum price a defensive investor should pay for a stock. Graham — Warren Buffett's mentor and author of 'The Intelligent Investor' — derived this formula from two constraints: P/E should not exceed 15 and P/B should not exceed 1.5, leading to the rule that P/E × P/B should not exceed 22.5. Rearranging gives the Graham Number: √(22.5 × EPS × BVPS). Any stock trading below this price is considered potentially undervalued by Graham's conservative standards. While dated (the 22.5 constant hasn't changed since 1962), the Graham Number remains a useful quick screen for value investors.

The Math Behind It

Benjamin Graham, the 'father of value investing', wrote The Intelligent Investor (1949) which remains required reading for serious investors. In it, he proposed two categories of investors: defensive (passive, conservative) and enterprising (active, skilled). For defensive investors, he recommended strict financial criteria. **The 22.5 Constant**: Graham's defensive criteria: 1. **P/E ratio ≤ 15**: Stock price shouldn't exceed 15× earnings 2. **P/B ratio ≤ 1.5**: Stock price shouldn't exceed 1.5× book value Multiplying these limits: 15 × 1.5 = 22.5 So the combined constraint: P/E × P/B ≤ 22.5, which rearranges to: - (P/EPS) × (P/BVPS) ≤ 22.5 - P² / (EPS × BVPS) ≤ 22.5 - P² ≤ 22.5 × EPS × BVPS - **P ≤ √(22.5 × EPS × BVPS)** This √ formula is the Graham Number — the maximum price Graham would pay. **Example**: Stock with $4 EPS and $16 BVPS: - Graham Number = √(22.5 × 4 × 16) = √1440 = $37.95 - If the stock trades at $30, it's below Graham Number — potentially undervalued - If it trades at $50, it's above — overvalued per Graham **Graham's Seven Defensive Criteria**: 1. Adequate size (large, established companies) 2. Strong financial condition (current ratio > 2) 3. Earnings stability (positive earnings for 10+ years) 4. Dividend record (uninterrupted dividends for 20+ years) 5. Earnings growth (at least 33% growth over 10 years, using 3-year averages) 6. Moderate P/E ratio (≤ 15) 7. Moderate P/B ratio (≤ 1.5, or P/E × P/B ≤ 22.5) The Graham Number captures criteria 6 and 7 in a single calculation. **Modern Critique**: The 22.5 multiplier was chosen when interest rates were 4-5%. In low-rate environments (post-2008), some argue the multiplier should be higher. Also, Graham's focus on book value fails for asset-light businesses — tech companies often violate his criteria while still being excellent investments. **Adaptations**: Some modern value investors use 40 instead of 22.5 to account for lower rates, producing: P ≤ √(40 × EPS × BVPS). Others combine Graham Number with ROIC, ROE, and quality metrics to find 'Graham stocks with a moat'.

Formula Reference

Graham Number

Graham Number = √(22.5 × EPS × BVPS)

Variables: 22.5 = 15 (max P/E) × 1.5 (max P/B), EPS = earnings per share, BVPS = book value per share

Worked Examples

Example 1: Classic Value Stock

A stock has EPS of $5.00 and book value per share of $30.00.

Step 1:22.5 × 5 × 30 = 3375
Step 2:√3375 = $58.10

Graham Number is $58.10 — the maximum price Graham would recommend. If trading below $58, it's in value territory.

Example 2: Premium Valuation

A stock with EPS of $3 and BVPS of $15.

Step 1:22.5 × 3 × 15 = 1012.5
Step 2:√1012.5 = $31.82

Graham Number is $31.82. If stock trades at $50, it's 57% above Graham's maximum — overvalued by these strict standards.

Common Mistakes & Tips

  • !Applying Graham Number to tech stocks. Graham's methodology was designed for asset-heavy, mature businesses.
  • !Ignoring the other 6 Graham criteria. Graham Number alone isn't enough — quality matters.
  • !Using unsustainable earnings. Use 3-year or 5-year average EPS to smooth out cyclicality.
  • !Forgetting that Graham Number gives a ceiling, not a target. Below it doesn't automatically mean buy.

Related Concepts

P/E Ratio

Graham's 15x limit is one of two constraints in Graham Number.

Price-to-Book Ratio

Graham's 1.5x limit is the other constraint.

Intrinsic Value

A more flexible valuation approach.

Frequently Asked Questions

Is Graham Number still relevant today?

Yes, but with caveats. It remains useful as a quick screen for mature, asset-heavy companies (banks, utilities, industrials). For tech and growth stocks, it's inadequate. Many modern value investors use Graham Number as one of several filters rather than a standalone criterion.

Why 22.5 and not some other number?

Graham chose 15 as the maximum reasonable P/E for defensive investors in the 1960s interest rate environment. He chose 1.5 as the maximum P/B because most companies trade near book value. 15 × 1.5 = 22.5. Modern low-rate environments may justify higher multipliers.

What if EPS or BVPS is negative?

Graham Number doesn't work — you can't take a square root of a negative number. Graham explicitly excluded companies with unprofitable years or negative book value. His defensive criteria required 10+ years of positive earnings.

How does Graham Number relate to intrinsic value?

Graham Number is a simple ceiling for defensive investors — it says 'don't pay more than this'. Intrinsic value (DCF, residual income) estimates the true value more precisely but requires more assumptions. Graham Number is a floor-level screen; DCF is a precision tool.