Graham Dodd Fair Value Calculator

The Graham Dodd Formula rates growth stocks by using the magic formula of two stock market legends! Benjamin Graham was the tutor of Warren Buffet and was the inventor of fundamental securities analysis. He created the basis for the value approach, which invests in stocks that are worth more than they currently cost. For this purpose, Graham and Dodd presented a valuation method as early as 1962, which uses a formula to determine the approximate true value of a stock. Follow in the footsteps of stock market legends in this simple Graham Dodd calculator and try out the valuation approach from the 1962 book Security Analysis by Benjamin Graham and David L. Dodd.

Graham Dodd Formula to determine intrinsic value

Graham worked hard to develop a formula that would simplify stock valuation. He also presents his valuation formulas in Benjamin Graham's classic book "The Intelligent Investor". Graham calls fair value "intrinsic value".

Original Benjamin Graham Dodd Formula to calculate intrinsic value of a stock:

Intrinsic Value = Earnings per share * (8,5 + 2 Growth)

Earnings per share and growth can be read from the annual report of every stock corporation. In addition, there are stock exchange portals that clearly display this information. Earnings per share are the company's profit divided by the number of shares issued. For earnings per share, one can often find "estimates" online, that is, forecast earnings per share. These estimates can of course also flow into the input of this calculator. For growth, one should estimate profit growth and sales growth over the next 10 years. An average value from the past year is suitable for estimating the correct growth.

formula in the graham dodd Calculator

In this calculator we use the further developed method in which the calculator uses three different formulas depending on how high the entered growth is:

  • If growth is less than 5%: earnings per share * (8.5 + 2 growth)
  • If growth of 5 to 10%: Earnings per share * 15
  • If growth is greater than 15%: Earnings per share * growth

Depending on the input, one of the three formulas is selected in the background of the calculation and the fair value is calculated.

How to find Earnings per share and growth?

You can find the input numbers for this calculator either on Yahoo Finance or in our automated database. Look for fundamental data or financials where you can find diluted EPS (Earnings per share) and Revenue. Growth is the revenue growth from one year to an other. In our Online Tool the Fairvalue-Calculator, we already calculated more than 35000 stocks on their intrinsic value and data like EPS and growth are loaded into our database automatically. Try our Online Tool now for free and find thousand of undervalued stocks! 

Limitations and critics

Benjamin Graham placed the formula rather inconspicuously in his book "The Intelligent Investor" and also indicated that this formula is only an indication of the possible intrinsic value (fair value) of a stock. In addition, Graham neglects many other important factors that are important to the success of a company.

For this reason, we launched the Fair Value Calculator, which uses further developments and other online tools to determine the intrinsic value of stocks more precisely. In addition to the advanced manual calculators, which use 7 key figures instead of just 2 fundamental key figures, all evaluation models are clearly summarized in the premium area of the Fairvalue calculator.

With the premium tools of the Fair Value Calculator, you no longer have to search for the fundamental key figures yourself. The Premium Tools automatically load the fundamental key figures from the annual report into the formulas and clearly display the already calculated fair values in the database. You can then summarize these in a watchlist in your personal dashboard. A stock screener and portfolio manager help you build a meaningful portfolio and tools to determine the intrinsic value of an entire industry and even the entire market are also available. All at a fair price.

The Fairvalue Calculator is also aimed at beginners who are not yet very familiar with fundamental stock analysis. In order to support beginners, we have created 6 lessons in the tutorial area in addition to a detailed explanation to make it easier to get started with buying shares. These are not too long and you can go through them one after the other. Free of charge, of course.