Graham Number Calculator

In the realm of value investing, the Graham Number is a well-known metric that helps investors assess the intrinsic value of a stock. The Graham Number Calculator is a straightforward online tool that allows users to calculate the Graham Number using two key inputs: book value per share and earnings per share. With no advanced configuration or customization options, this tool provides a quick and reliable way to determine whether a stock is undervalued or overvalued according to Benjamin Graham's principles.

The Graham Number Calculator derives its name from Benjamin Graham, widely regarded as the father of value investing. Graham believed that the price of a stock should be based on its intrinsic value rather than mere speculation. The Graham Number is a conservative estimate of a stock's fair value and serves as a benchmark for value investors.

To calculate the Graham Number, two inputs are required: the book value per share and the earnings per share. The book value per share represents the net asset value of a company divided by the total number of outstanding shares. It provides insight into the company's net worth and the value of its assets. Earnings per share, on the other hand, represent the net income of a company divided by the total number of outstanding shares. It reflects the profitability of the company on a per-share basis.

The Graham Number is calculated by taking the square root of (22.5 x earnings per share x book value per share). According to Benjamin Graham's methodology, the multiplier of 22.5 is used to account for the desired margin of safety. By multiplying the earnings per share and book value per share by this factor, the Graham Number reflects a conservative estimate of a stock's fair value.

The Graham Number is particularly useful for value investors looking for stocks that are trading at a significant discount to their intrinsic value. If the current market price of a stock is lower than its Graham Number, it suggests that the stock may be undervalued. Conversely, if the market price exceeds the Graham Number, it may indicate that the stock is overvalued.

In conclusion, the Graham Number Calculator is a powerful tool for value investors looking to assess the intrinsic value of a stock. By considering the book value per share and earnings per share, this calculator provides a conservative estimate of a stock's fair value according to Benjamin Graham's principles. Whether you are an experienced investor following value investing strategies or a novice looking to make informed investment decisions, the Graham Number Calculator is a valuable resource for unlocking the potential of undervalued stocks.