Should I still buy the stock or is it already too expensive? Anyone who has ever bought shares and wants to buy a share that has already risen knows that moment when you ask yourself exactly that question. Graham's Number provides the answer to exactly this question: Up to what price can I buy the stock? With this online calculator you can quickly and easily determine the maximum buying price of every stock worldwide. To do this, just add the earnings per share and the book value per share into the calculator. Remember that earnings and book value should be positive.
Graham Number = Highest price that should be paid for a stock
The Graham number goes back to the legendary stock market guru (and teacher of Warren Buffett) Benjamin Graham. As the inventor of fundamental securities analysis and the first to adopt the value approach, he and Warren Buffet were able to amass an incredible fortune and made stock market history. The Graham number also refers to Benjamin Graham. The Graham number measures the upper limit of the share price at which a share should be bought using earnings per share and book value per share. The Graham Number can also be used to find cheap, undervalued stocks that are worth buying.
The Graham number is calculated from the combination of book value and earnings per share. Anchored in the formula are Graham's requirements that a share should have a lower price/ earnings ratio (P/E) than 15 and a lower price/ book value (P/E) ratio than 1.5. (15 * 1.5 = 22.5):
Root of (22.5 * earnings per share * book value per share)
The formula is stored in this online calculator and the user only needs to enter the earnings per share and the book value per share into the calculator. The result is the maximum price that should be paid for one share, according to Benjamin Graham.
Since the Graham number only uses earnings per share and book value per share, it lacks the interpretation of other important parameters such as profitability, management quality, margins and growth opportunities. The Graham number is well suited for a first quick look at the possible maximum share price, but you should still include other key figures and also address the quality of the share.
In order to deal with further key figures, we have developed the Fairvalue Calculator, an extended calculator with 7 fundamental key figures, which takes other influencing factors into account. If the search for the fundamental key figures is too complicated for you, you can also opt for the premium membership in the Fairvalue Calculator. There the fundamental key figures are loaded automatically and all kinds of fair values are calculated and displayed. Plus, you get many more tools to help you invest. In addition to a stock screener and a market & industry analysis, a quality test is also available with which you can, for example, check the quality of a company that Graham does not address with the Graham number.
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.
Disclaimers: fairvalue-calculator.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on fairvalue-calculator.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The experts may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall fairvalue-calculator.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on fairvalue-calculator.com, or relating to the use of, or inability to use, fairvalue-calculator.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. With the Use of the Portfolio Manager you don´t actually buy stocks with real money. You just get the Information of how a stock portfolio could be compiled. To follow the instructions on this side is no guarantee for success on the stock market. Stock investments are risky and can cause financial damage or lead to money losses.