Graham Formula Calculator (Graham Formel) - Fair Value
Graham's revised formula: V = EPS × (8.5 + 2g) × 4.4 / Y - growth vs. bond yield.
Also available in German: Graham-Formel Rechner - Graham-Dodd Fair Value →
Inputs
Earnings per share (EPS)
Also called: EPS, net income per share
Where to find it: Bottom of the income statement, or the key-stats box on finance portals.
How to derive: Net income ÷ shares outstanding.
Growth rate
Also called: Growth per year
Where to find it: Analyst estimates or the company’s historical earnings/revenue growth.
How to derive: (value now ÷ value n years ago)^(1/n) − 1. Estimate conservatively!
AAA bond yield
Also called: Corporate bond yield
Where to find it: Finance portals / central-bank stats (top-rated corporate bond yield).
How to derive: Current yield on AAA corporate bonds. Graham anchored his formula on this.
Share price
Also called: Stock price, market price
Where to find it: Any finance site (Google/Yahoo Finance) — the current trading price per share.
How to derive: Set by the market; just enter the current price per share.
Result, live
Graham himself warned against blind use: the formula overshoots growth names in low-rate regimes. Estimate growth conservatively!
The Graham-Dodd calculator uses Graham's later, revised growth formula: it turns earnings and expected growth into a fair value and adjusts it for today's interest rates. Meant for stocks with reasonably foreseeable earnings growth.
How the formula works
The core (8.5 + 2g) is a fair P/E for a no-growth firm plus a growth premium. The factor 4.4 / Y scales the result to the current AAA bond yield.
g = growth in % · Y = AAA bond yield in %
Example: $5 EPS, 7% growth, Y = 4.4%: $5 × (8.5 + 14) × 4.4/4.4 = $5 × 22.5 = $112.50.
How to read the result
- Upside above +10%: price below the formula value — potentially cheap.
- −10% to +10%: near fair value.
- Upside below −10%: pricier than the formula allows.
What to watch out for
- Growth g leverages hard: via the 2g term every over-optimistic estimate hits twice — keep g conservative.
- Low rates inflate it: a small Y pushes the value up; in low-rate regimes the formula overshoots, as Graham himself warned.
- Normalized earnings only: one-off gains or an outlier year distort the result.
Frequently asked questions
What do 8.5 and 4.4 mean?
8.5 is the fair P/E of a no-growth firm; 4.4% was the average AAA bond yield when Graham calibrated it. Y adjusts it to today's rates.
Is the formula still useful today?
As a rough guide yes, as a precision tool no. With very low rates and high g it quickly produces inflated values.
What growth and yield should I enter?
Analyst estimates for g, a current AAA yield for Y. In our Fair Value Calculator the figures are already on file for 35,000+ stocks — no typing required.