1. What is the Graham Value?

The Graham Value (or Graham Number) is a conservative estimate of the fair value of a stock, developed by Benjamin Graham, the father of value investing. It provides a maximum price an investor should pay for a stock based on its earnings and book value.

2. How Does the Calculator Work?

The calculator uses the Graham Value formula:

Where:

• \( EPS \) — Earnings per share (USD)
• \( Book Value per Share \) — Net asset value per share (USD)
• 22.5 — Graham's multiplier representing a P/E of 15 and P/B of 1.5

Explanation: The formula combines earnings power (EPS) with asset value (book value) to determine a fair valuation that limits overpaying for growth expectations.

3. Importance of Graham Value

Details: The Graham Value helps identify potentially undervalued stocks and sets a conservative price ceiling for value investors. It's particularly useful for defensive investors seeking margin of safety.

4. Using the Calculator

Tips: Enter EPS and Book Value per Share in USD. Both values must be positive numbers. The calculator will determine the maximum recommended price per share according to Graham's formula.

5. Frequently Asked Questions (FAQ)

Q1: Why does Graham use 22.5 in the formula?
A: 22.5 represents Graham's recommended maximum of 15× P/E ratio multiplied by 1.5× P/B ratio (15 × 1.5 = 22.5).

Q2: What are good Graham Value comparisons?
A: Stocks trading below 80% of their Graham Value may be worth investigating as potential value investments.

Q3: What are limitations of the Graham Value?
A: It works best for stable, asset-heavy companies and may undervalue high-growth or asset-light businesses.

Q4: Should I only buy stocks below Graham Value?
A: It's a conservative guideline. Many quality companies trade above their Graham Value due to growth prospects.

Q5: How often should I recalculate Graham Value?
A: Recalculate with each new quarterly report showing updated EPS and book value figures.