Graham Number Calculator
The Graham Number Calculator is a tool used in value investing to estimate the fair value of a stock. It is based on Benjamin Graham's formula, which considers earnings per share (EPS) and book value per share (BVPS). The Graham Number represents the upper price limit that a prudent investor should pay for a stock. This calculator simplifies the process, helping investors quickly determine if a stock is overvalued or undervalued.
Formula of Graham Number
The formula for the Graham Number is:
Graham Number = √(22.5 × EPS × BVPS)
How to Use the Graham Number Calculator
To use the Graham Number Calculator, input the earnings per share (EPS) and the book value per share (BVPS) of the stock. Click "Calculate" to find the Graham Number. The result will indicate the maximum price you should pay for the stock based on Benjamin Graham's principles. Use the "Clear" button to reset the inputs for a new calculation.
FAQs About Graham Number Calculator
1. What is the Graham Number?
The Graham Number is a stock valuation method that provides the maximum price an investor should pay for a stock. It is calculated using EPS and BVPS.
2. Who invented the Graham Number?
The Graham Number was introduced by Benjamin Graham, often considered the father of value investing.
3. Why use the Graham Number Calculator?
It simplifies stock valuation by automating calculations, helping investors make informed decisions quickly.
4. Can the Graham Number guarantee returns?
No, it is a guideline and should be used with other analysis methods for investment decisions.
5. What data is required to calculate the Graham Number?
You need the EPS and BVPS of the stock to calculate the Graham Number.
6. Is the Graham Number suitable for all stocks?
No, it is best used for established companies with consistent earnings and book value.
7. How accurate is the Graham Number?
It is a useful indicator but not a definitive measure of stock value.
8. Can the Graham Number change over time?
Yes, it changes with fluctuations in EPS and BVPS.
9. Is the Graham Number Calculator free to use?
Yes, this calculator is free to use for investors and financial enthusiasts.
10. What should I do if a stock's price exceeds the Graham Number?
Consider it overvalued and evaluate if it aligns with your investment strategy before proceeding.