Compute the Graham Number, margin of safety, and P/E × P/B from earnings and book value — free, with no signup. Look up an S&P 500 company or enter your own figures for any stock worldwide.
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The Graham Number is Benjamin Graham's shortcut for fair value on a defensive stock: the square root of 22.5 times earnings per share times book value per share. It combines Graham's two price ceilings — no more than 15 times earnings and no more than 1.5 times book — into one figure.
22.5 is the product of Graham's two limits: 15 (maximum P/E ratio) multiplied by 1.5 (maximum P/B ratio). The Graham Number formula √(22.5 × EPS × BVPS) is equivalent to √(15 × EPS × 1.5 × BVPS).
Margin of safety is how far the current price sits below Graham's fair value, expressed as a percentage of fair value: (fair value − price) ÷ fair value. A positive margin means the stock trades below fair value; a negative margin means it trades above.
The formula is anchored in book value. It is a poor fit for asset-light companies where book value does not describe the business — for example when book value per share is less than twice earnings, or when the price-to-book ratio is very high (5 or above). In those cases the computed number can be meaningless even though the arithmetic is correct.
In later editions of The Intelligent Investor, Graham published a growth-adjusted formula: V = EPS × (8.5 + 2g) × 4.4 ÷ Y, where g is the expected annual growth rate in percent and Y is the yield on AAA corporate bonds. Graham treated growth above 20% as too speculative for this formula.
