Graham Number Calculator
Calculate the Graham Number from earnings and book value per share, then compare its estimate with a current share price.
Earlier editorial review
- Reviewed
- 2026-09-25
- Methodology
- 1.1
Sources
How it works
Enter positive earnings per share, positive book value per share, and a current price of zero or more. Use amounts in the same currency and on the same share basis. The calculator applies the square root of 22.5 multiplied by EPS and BVPS.
The results show the formula estimate, the current price divided by that estimate, and the percentage gap. Implied P/E and P/B show the ratios that would apply at the formula estimate, based on the entered EPS and book value per share.
Compare the output with the underlying filings and other valuation methods. The formula does not test business quality or establish fair value. A result at or below the estimate is a mathematical comparison, not a recommendation.
Recheck the reporting dates, currency, and share basis when either accounting input changes. A split, dilution, buyback, restatement, or unusual item can make previously entered figures inconsistent.
Step by step
- Enter EPS, book value per share, and current price.
- Check that all inputs use the same currency and share basis.
- Review the estimate, ratio, percentage gap, and implied ratios.
Worked example
Enter earnings per share of 5.50, book value per share of 45.00, and a current price of 75.00, all in the same currency and on a consistent share basis. The formula estimate is 74.624058. The price to estimate ratio is 1.00504 and the margin is negative 0.50378%.
At the formula estimate, implied price to earnings is 13.56801 and implied price to book is 1.65831. Their product is 22.5. This example illustrates the formula only; it does not establish that the shares are worth that amount.
When to use this calculator
Use this calculation when you want to compare a share price with a formula based on positive EPS and book value per share. It is most interpretable when both figures are reliable, use compatible reporting periods, and reflect the same share basis.
For businesses whose value depends on future cash flow or intangible assets, compare the formula with methods that explicitly model those factors. No single calculation resolves those assumptions.
Common input errors
Do not mix EPS and book value figures with different dates, currencies, or share counts. Confirm whether each figure is basic or diluted and whether EPS is reported or adjusted.
Do not treat a positive percentage gap as evidence of safety. The calculation cannot identify temporary earnings peaks, impaired assets, high leverage, or other risks outside its inputs.
Formula
Graham Number = √(22.5 × EPS × BVPS)
Margin of Safety = (Graham Number − Current Price) ÷ Graham Number × 100
Price to Graham Ratio = Current Price ÷ Graham Number
Implied P/E = Graham Number ÷ EPS
Implied P/B = Graham Number ÷ BVPS
EPS and book value per share must be positive. Enter all three values in the same currency and with a consistent per share basis. No currency conversion is performed. The estimate is a formula comparison, not a forecast or a buy signal.
Limits and assumptions
The formula uses only EPS and book value per share. It does not model future growth, cash flows, debt risk, earnings quality, asset impairment, or intangible value. The result depends on the entered accounting figures and does not reproduce Graham's full defensive investment screen.
Key terms
- Graham Number
- Graham Number: the square root of 22.5 multiplied by earnings per share and book value per share.
- The 22.5 factor
- The 22.5 factor is 15 multiplied by 1.5. At the formula estimate, the implied price to earnings and price to book ratios have a product of 22.5.
- Price gap
- The price gap is the formula estimate minus current price, divided by the formula estimate and expressed as a percentage. A positive gap means the price is below the estimate.
Compare related methods
Free Cash Flow Yield adds a cash generation measure, while Altman Z Score examines financial distress indicators that are absent from the Graham formula.
Discounted Cash Flow Valuation uses forecast cash flows and assumptions about future growth. The Graham Number uses only earnings per share and book value per share, so comparing the methods can show how much the result depends on those assumptions.
FAQ
How does the Graham Number formula work?
The Graham Number is the square root of 22.5 times earnings per share times book value per share. It combines two reported per share figures into a single formula estimate. It is one screen, not Benjamin Graham's complete stock selection method or a current valuation verdict.
Why does the formula use 22.5?
The factor 22.5 equals 15 times 1.5. The formula implies that price to earnings multiplied by price to book equals 22.5 at the estimate. It does not require each ratio to equal 15 and 1.5 separately. For example, implied ratios of 9 and 2.5 also multiply to 22.5.
What does the margin of safety show?
The margin is (formula estimate minus current price) divided by the formula estimate, multiplied by 100. A positive value means the entered price is below the estimate; a negative value means it is above. The percentage describes the gap only. It does not measure the quality or reliability of the inputs.
Does a price below the estimate mean a stock is undervalued?
No. A price at or below the formula estimate is only a comparison with this calculation. The formula does not assess earnings quality, debt, future growth, asset impairment, or whether reported book value could be realized. A price gap is not proof that a share is undervalued or safe.
When is this formula a poor fit?
The calculation requires positive earnings per share and positive book value per share. It can be a poor fit when value depends mainly on brands, software, research, or other intangible assets, and it does not adjust for cyclic earnings or unusual accounting items. Use figures from compatible reporting periods and share bases.
Related tools
Use Free Cash Flow Yield to examine cash generation, Altman Z Score to review distress indicators, Discounted Cash Flow Valuation to compare forecast assumptions, or the Margin of Safety Calculator to examine a different price gap calculation.