Graham Number Calculator

Formula

The formula to calculate the Graham Number (GN) is:

\[ GN = \sqrt{22.5 \times EPS \times BPS} \]

Where:

$ EPS $ is the earnings per share ($).
$ BPS $ is the book value per share ($).

Example

Let's say the earnings per share ($ EPS $) is $5 and the book value per share ($ BPS $) is $20. Using the formula:

\[ GN = \sqrt{22.5 \times 5 \times 20} \]

We get:

\[ GN = \sqrt{2250} \approx 47.43 \text{ dollars} \]

So, the Graham Number ($ GN $) is approximately $47.43.

What is the Graham Number?

The Graham Number is a metric used to evaluate the highest price an investor should pay for a stock. It is calculated using the book value per share (BVPS) and the earnings per share (EPS) of a particular stock. It helps investors determine if a stock is undervalued or overvalued based on its financial performance.

Extended information about "Graham-Number-Calculator"

Graham Number Calculator for Stock Valuation

Definition: The Graham number is a figure used to determine the maximum price that an investor should pay for a stock.

Formula: $ \text{Graham Number} = \sqrt{22.5 \times \text{EPS} \times \text{BVPS}} $

$ \text{Graham Number} $: Maximum price per share
$ \text{EPS} $: Earnings per share
$ \text{BVPS} $: Book value per share

Example: $ \text{Graham Number} = \sqrt{22.5 \times 5 \times 20} $

$ \text{Graham Number} $: Maximum price per share
$ \text{EPS} $: 5
$ \text{BVPS} $: 20

Benjamin Graham Formula Calculator

Definition: The Benjamin Graham formula is used to estimate the intrinsic value of a stock.

Formula: $ \text{Intrinsic Value} = \frac{\text{EPS} \times (8.5 + 2g)}{Y} $

$ \text{Intrinsic Value} $: Estimated intrinsic value of the stock
$ \text{EPS} $: Earnings per share
$ g $: Expected annual growth rate (as a percentage)
$ Y $: Current yield of AAA corporate bonds

Example: $ \text{Intrinsic Value} = \frac{5 \times (8.5 + 2 \times 4)}{3} $

$ \text{Intrinsic Value} $: Estimated intrinsic value of the stock
$ \text{EPS} $: 5
$ g $: 4%
$ Y $: 3%