Graham Number calculator
The price at which P/E times P/B equals 22.5: Graham's 15x earnings times 1.5x book.
Fill it from a company
Illustrative inputs
Diluted EPS for the latest full year, from the income statement.
Shareholders' equity over the diluted share count, from the balance sheet.
What one share costs. Only the comparisons use it; no filing contains it.
Graham Number
47.43
Your price is 1.26 times it. P/E x P/B: 36.00 against 22.5.
Show the working
| Step | Value |
|---|---|
| The constant, 15 x 1.5 | 22.50 |
| 22.5 x EPS x book value per share | 2,250 |
| Square root | 47.43 |
| Graham Number | 47.43 |
| Step | Value |
|---|---|
| Price to earnings | 15.00x |
| Price to book | 2.40x |
| The two multiplied | 36.00 |
| Graham's ceiling for that product | 22.50 |
| Price over the Graham Number | 1.26 |
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How it works
Graham Number = sqrt(22.5 x EPS x book value per share)
- 22.5 is 15 x 1.5: Graham's ceilings on price to earnings and price to book.
- At the Graham Number, P/E times P/B equals exactly 22.5.
- Negative earnings or book value give n/m: the test does not apply.
Reading the result
The bar runs to the Graham Number; the dotted line is your price. Under each multiple, the ticks are the published cohort and the bracket is where your figure lands.
The label names the two marks it sits between. Both cohorts use stored prices, dated as shown, not today's.
Questions
Where does 22.5 come from?
From The Intelligent Investor: a defensive investor pays no more than 15 times average earnings and 1.5 times book, and a P/E below 15 can justify a higher price to book while the product stays at or under 22.5.
Is the Graham Number a fair value?
No. It is a screening ceiling: the price at which P/E times P/B equals 22.5. It is not an estimate of what a business is worth.
Why does it return n/m?
The tests need positive earnings and positive book value. A loss, or equity pushed below zero by buybacks, takes a company outside the test, so the page prints n/m rather than a number.
Why one year of earnings?
Because that is the figure the product stores. Graham used an average of three years, so entering your own three-year average is closer to his test.
What this leaves out
- With book value above ten times EPS, the Graham Number sits above 15x earnings.
- Book value misses brands, software and research that were expensed as they were built.
- A price under the Graham Number is a statement about two ratios, nothing more.
Next step
The multiples he printed, placed against the US companies that file the figures they are computed from, read at request time rather than frozen into a sentence.
The arithmetic runs in your browser, so the numbers you type never leave it. Disclaimer.