Calculate Benjamin Graham's intrinsic value ceiling, margin of safety, upside/downside, and sector-adjusted Graham Number from EPS and book value
| Margin of safety | Category | What it means |
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| Sector | Typical P/E × P/B | Sector Graham Number | Price vs. sector GN |
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| Metric | Value | Notes |
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Faiq Ur Rahman is a web designer, digital product developer, and founder of Toolraxy, a growing platform of web-based calculators and utility tools. He specializes in building structured, user-friendly tools focused on health, finance, productivity, and everyday problem-solving.
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Most valuation metrics give you a target price and leave the judgment to you. The Graham Number works differently. It sets a ceiling. Anything at or below that number passes Graham’s defensive screen. Anything above it fails.
That makes the tool useful for two groups: value investors who want a quick pass/fail test, and anyone curious why a stock with a 40 P/E never clears Benjamin Graham’s bar. You’ll enter three inputs, get a clean verdict, and see exactly which sector multiples would change the answer.
Choose your currency. Every money field updates to the symbol you pick, from USD to INR to BRL.
Type the current share price. Use the latest close or a live quote.
Enter earnings per share. Trailing twelve-month diluted EPS works best. Loss-making companies won’t produce a valid number.
Enter book value per share. Take total shareholders’ equity and divide by shares outstanding.
Add the share count. Optional, but it lets the tool show the market value of your position and what it would be worth at the Graham Number.
Select an industry profile. This swaps Graham’s classic 22.5 multiplier for a sector-specific one.
Set expected growth. This feeds Graham’s other formula, V = EPS × (8.5 + 2g), shown in the breakdown.
Adjust the required margin of safety. The default 30% produces a buy-below price. Lower it if you want a tighter cushion.
The formula multiplies earnings per share by book value per share, multiplies by 22.5, then takes the square root.
Formula: Graham Number = √(22.5 × EPS × Book Value Per Share)
That 22.5 isn’t arbitrary. Graham capped defensive purchases at 15 times earnings and 1.5 times book. Multiply those together and you get 22.5. A stock trading at 12× earnings and 1.2× book sits under that ceiling. A stock at 30× earnings and 6× book doesn’t come close.
The square root is the elegant part. It gives equal weight to both constraints without letting either one dominate. If EPS rises 20% but book value stays flat, the Graham Number rises roughly 10%, not 20%.
Formula: Margin of Safety = (Graham Number − Price) ÷ Graham Number × 100
A positive margin means the price is below the ceiling. A negative margin means the price has climbed above it. The tool grades every result from “Deep value” (above 50%) down to “Well above Graham Number” (more than 30% premium).
Formula: Buy-Below Price = Graham Number × (1 − Required MoS)
If the Graham Number is $52 and you want a 30% cushion, your buy-below is $36.40.
Edge cases: if EPS or book value is zero or negative, the Graham Number is undefined. The tool flags this and explains which input caused the problem. Negative products can’t produce a real square root, so the math correctly refuses.
You’re looking at a regional bank trading at $38.50. Trailing EPS is $3.60. Book value per share is $24.80. You own 200 shares.
Step 1: Graham Number = √(22.5 × 3.60 × 24.80). That’s √(2,008.80), which equals $44.82.
Step 2: Margin of safety = ($44.82 − $38.50) ÷ $44.82 × 100 = 14.1%.
Step 3: Upside to the ceiling = ($44.82 − $38.50) ÷ $38.50 × 100 = +16.4%.
Step 4: With the default 30% required cushion, buy-below = $44.82 × 0.70 = $31.37. The current price sits between the buy-below and the Graham Number, so it lands in the “Modest margin” bucket.
Step 5: Switch the industry to “Banks / Financials.” The sector multiplier drops to 12 (10× P/E × 1.2× P/B). The sector-adjusted Graham Number becomes √(12 × 3.60 × 24.80) = $32.72. At that benchmark, the stock trades above its ceiling.
Same company. Two sector assumptions. Two different verdicts.
It’s the square root of 22.5 times earnings per share times book value per share. The 22.5 comes from Graham’s cap of 15 times earnings and 1.5 times book value, multiplied together.
It tells you the highest price a defensive investor should pay for a stock. If the market price is below that number, the stock passes Graham’s basic valuation test. If it’s above, it doesn’t.
Multiply EPS by book value per share, multiply by 22.5, then take the square root. A $5 EPS and $30 book value gives √(22.5 × 5 × 30) = √3,375 = $58.09. Compare that to the current share price.
It works well for banks, insurers, utilities, and other asset-heavy businesses. It’s less useful for tech and service companies where book value doesn’t reflect the real value of the business. Use it as one screen, not the only screen.
Graham’s own floor was 33%. Many value investors use 20% to 30% as a practical cushion. The calculator defaults to 30%, but you can set it anywhere from 0% to 90% depending on how conservative you want to be.
That usually means the market is pricing in growth, brand value, or intangible assets that don’t show up in book value. It could also mean the stock is overvalued by Graham’s standards. Check both EPS and book value before drawing a conclusion.
No. If EPS or book value per share is negative, the product under the square root is negative, and the Graham Number is undefined. The calculator flags this and tells you which input caused the problem.
There’s no absolute “good” number because it depends on the share price. What matters is the gap between the Graham Number and the current price. A larger positive gap means a bigger margin of safety.
Instead of 15× earnings and 1.5× book, it uses industry-typical multiples. Banks get 10× and 1.2×. Tech gets 25× and 5×. This produces a higher or lower Graham Number depending on the sector, making comparisons across industries more realistic.
Use trailing twelve-month EPS. Graham built the formula for conservative, verified inputs. Forward estimates introduce analyst optimism and are more likely to shift quarter to quarter.
Use a conservative long-term estimate, typically 3% to 6% for mature companies. Anything above 10% assumes sustained above-average growth, which is rare over decades. The V = EPS × (8.5 + 2g) formula amplifies growth assumptions quickly.
No. It only uses earnings and book value. A company with heavy debt can still produce a valid Graham Number. Pair it with a debt-to-equity check and an interest coverage ratio before making a decision.
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