Enter the total earnings per share (EPS) and book value per share into the calculator to determine the Graham Number.

Graham Number Calculator

Enter any 2 values to calculate the missing variable

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Graham Number Formula

The Graham Number is a classic value investing estimate of the maximum price an investor may be willing to pay for a stock based on both earnings power and balance-sheet value. It combines earnings per share and book value per share into one conservative valuation figure.

GN = \sqrt{22.5 \cdot EPS \cdot BVPS}
  • GN = Graham Number
  • EPS = earnings per share
  • BVPS = book value per share

If your calculator is solving for a different missing value, the same relationship can be rearranged as follows:

EPS = \frac{GN^2}{22.5 \cdot BVPS}
BVPS = \frac{GN^2}{22.5 \cdot EPS}

How to Use the Calculator

  1. Enter the company’s earnings per share.
  2. Enter the book value per share.
  3. Click calculate to find the Graham Number.
  4. Compare the result to the current share price to see whether the stock appears priced below, near, or above this conservative benchmark.

For a meaningful result, use per-share values from the same reporting period and in the same currency.

What the Graham Number Tells You

The Graham Number is designed to be a conservative valuation ceiling. In general:

Comparison Possible Interpretation
Market price is below the Graham Number The stock may look undervalued relative to this method.
Market price is close to the Graham Number The stock may be trading near a fair value estimate under Graham-style assumptions.
Market price is above the Graham Number The stock may be expensive by this specific value screen.

This is not a buy-or-sell rule by itself. It is best used as an initial screening tool before reviewing debt, cash flow, margins, growth quality, and industry conditions.

Why the Constant 22.5 Is Used

The constant 22.5 comes from multiplying two traditional valuation limits often associated with conservative value analysis: a price-to-earnings ratio of 15 and a price-to-book ratio of 1.5.

22.5 = 15 \cdot 1.5

That means the Graham Number blends profitability and net asset value into one figure rather than relying on only one valuation ratio.

Example

Suppose a company has earnings per share of 4.00 and book value per share of 3.50.

GN = \sqrt{22.5 \cdot 4.00 \cdot 3.50}
GN = \sqrt{315}
GN \approx 17.75

In this case, 17.75 is the Graham Number estimate for the stock.

When This Metric Is Most Useful

  • Evaluating mature, consistently profitable businesses
  • Comparing traditional value stocks within the same sector
  • Screening companies with meaningful tangible equity
  • Adding a conservative check alongside P/E, P/B, and cash-flow analysis

Important Limitations

  • Negative EPS: If earnings are negative, the formula is not useful in the traditional sense.
  • Negative BVPS: Negative book value usually makes the result unreliable for value screening.
  • Asset-light businesses: Companies driven by brand, software, or intangible assets may look weak on book value even when the business is strong.
  • No growth adjustment: The formula does not directly account for future growth, competitive advantages, or management quality.
  • Accounting sensitivity: Book value and earnings can be affected by write-downs, share buybacks, and accounting choices.

Practical Tips for Better Use

  • Compare the Graham Number with the current stock price, not in isolation.
  • Use normalized EPS if recent earnings were unusually high or low.
  • Check whether book value is supported by tangible assets or inflated by accounting items.
  • Review debt levels, since leverage can distort how safe a low valuation appears.
  • Use the metric as part of a broader process rather than as a standalone decision rule.

Frequently Asked Questions

Is a higher Graham Number better?

Not necessarily. The key comparison is between the Graham Number and the stock’s actual market price. A stock may look more attractive when its market price is meaningfully below its Graham Number.

Can I use this for any company?

It works best for profitable companies with positive book value. It is less informative for early-stage, highly leveraged, or intangible-heavy businesses.

What if the market price is above the Graham Number?

That usually suggests the stock is priced above this conservative value threshold. It does not automatically mean the stock is overvalued in every sense, only that it exceeds this specific Graham-based estimate.

What inputs matter most?

The result is highly sensitive to both EPS and BVPS. If either input changes materially, the Graham Number will change as well, so updated financial data matters.