Graham Number Valuation: Conservative Intrinsic Value Method
Learn the Graham Number valuation method: what it is, the formula, when it works best, and common pitfalls. A conservative intrinsic value approach for investors.
What is the Graham Number?
The Graham Number is a classic, conservative valuation method popularized by Benjamin Graham. It estimates a fair value based on earnings per share (EPS) and book value per share (BVPS).
The formula (conceptually)
The traditional Graham Number uses a square-root formula combining EPS and book value. It is intentionally conservative and works best for stable businesses with meaningful book value and positive earnings.
Graham-style methods often undervalue fast growers. That's a feature, not a bug: they aim to avoid overpaying.
When investors use it
- Mature, profitable companies with meaningful book value
- When you want a conservative floor valuation
- As a cross-check alongside DCF and relative valuation
Find Graham-style candidates
Use our tools to compare price vs intrinsic value and look for margin of safety.
FAQs
Is the Graham Number accurate?▼
It's a conservative estimate, not a precise truth. It can be useful as a floor valuation and as a cross-check with other methods.
When does the Graham Number fail?▼
It can be misleading for high-growth companies, asset-light software businesses, or firms with distorted book value.
Related
Intrinsic Investor is for education and research only. Not financial advice.