Graham Number

Definition

Graham number
The Graham Number is a conservative valuation metric introduced by Benjamin Graham to estimate the fair value of a stock based on its earnings and book value. This figure is calculated using a formula that factors in earnings per share and book value per share, setting a ceiling price that an investor should consider paying. The underlying principle is to secure a margin of safety by purchasing stocks well below their calculated intrinsic value, thus reducing investment risk. While simple in nature, the Graham Number provides a quantitative basis for value investors to screen for potentially undervalued stocks that may offer attractive long-term growth opportunities. It remains a trusted tool in disciplined investment strategies.

See also