How to Calculate Your Own Graham Number in 5 Minutes (Step-by-Step Tutorial)

Last updated: March 22, 2026

Most people think stock valuation is complicated. Spreadsheets, financial models, discounted cash flows — it sounds like something you need a finance degree to touch.

You don't.

Benjamin Graham — the father of value investing, Warren Buffett's mentor — built a formula so simple you can calculate it on a napkin. It's called the Graham Number, and it tells you the maximum price you should ever pay for a stock.

Two numbers in. One answer out. Done in under five minutes.

Here's how to do it.

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What the Graham Number Actually Is

Before we calculate anything, let's be clear on what this number means.

The Graham Number is your price ceiling. If a stock is trading below its Graham Number, it might be undervalued. If it's trading above it, Graham would walk away.

It doesn't predict the future. It doesn't promise profits. What it does is give you a rational anchor — a number rooted in a company's actual fundamentals — so you stop paying too much for hype.

The formula:

Graham Number = √(22.5 × EPS × Book Value Per Share)

That's it. Square root of 22.5, times earnings per share, times book value per share.

The magic number 22.5 comes from Graham's rule that a stock's P/E ratio should never exceed 15, and its price-to-book ratio should never exceed 1.5. Multiply 15 × 1.5 = 22.5. Simple math with decades of evidence behind it.

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What You Need Before You Start

You only need two data points:

1. EPS (Earnings Per Share) — How much profit the company made per share over the last 12 months. Also called "trailing twelve-month EPS" or "TTM EPS."
2. Book Value Per Share (BVPS) — The company's net asset value divided by shares outstanding. Basically, if you liquidated the company and paid off all debts, how much would each share be worth.

Where to find them — for free:

• Yahoo Finance → Search any stock → "Statistics" tab → EPS and Book Value are both listed
• Macrotrends.net → Historical EPS and book value charts
• SEC EDGAR → The actual financial statements if you want to go direct to source
• valueofstock.com Graham Calculator → Pulls the numbers automatically and does the math for you

If you want to skip the manual lookup entirely, use our free Graham Number Calculator — just type in a ticker and it spits out the number, the margin of safety, and whether the stock is a potential buy or overpriced.

But let's do this by hand first so you actually understand what you're looking at.

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Step 1: Find the EPS

Go to Yahoo Finance. Search for your stock. Click the "Statistics" tab.

Look for "EPS (TTM)" — this stands for Earnings Per Share, Trailing Twelve Months. This is the number you want.

Rules of thumb:

• EPS must be positive. Negative EPS means the company lost money. The Graham Number math breaks down (you can't take the square root of a negative number).
• If EPS is wildly inconsistent year to year, that's a red flag. Look for stability.

Example: Coca-Cola (KO) EPS (TTM) as of March 2026: $2.47

Write that down.

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Step 2: Find the Book Value Per Share

Same page on Yahoo Finance. Look for "Book Value Per Share (mrq)" — mrq means "most recent quarter."

Alternatively, you can calculate it yourself:

Book Value Per Share = (Total Assets − Total Liabilities) ÷ Shares Outstanding

Find total assets and total liabilities on the balance sheet (also on Yahoo Finance, under the "Financials" tab → Balance Sheet).

Rules of thumb:

• Book value must be positive. Negative means the company owes more than it owns — it could still be a fine business, but the Graham Number can't be calculated.
• Very low book value (relative to earnings) usually means an asset-light company like a software firm. The Graham Number tends to undervalue these, so take results with extra salt.

Example: Coca-Cola (KO) Book Value Per Share (mrq) as of March 2026: $5.14

Write that down too.

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Step 3: Plug Into the Formula

Now the math. Pull out your calculator (or your phone).

Graham Number = √(22.5 × EPS × BVPS)

For Coca-Cola:

• 22.5 × $2.47 × $5.14
• = 22.5 × $12.69
• = $285.53
• √$285.53 = $16.90

So the Graham Number for KO as of March 2026 is roughly $16.90.

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Step 4: Compare to the Current Stock Price

Coca-Cola's stock price as of March 2026: approximately $62.00.

Graham Number: $16.90.

That means KO is trading at 3.7× its Graham Number. In Graham's framework, that's significantly overvalued.

Does that mean you should never own Coca-Cola? Not necessarily. But Graham would want a very different price before committing capital.

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Step 5: Calculate the Margin of Safety

The margin of safety tells you how much cushion you have. Positive margin = potential bargain. Negative margin = paying a premium.

Margin of Safety = (Graham Number − Current Price) ÷ Graham Number × 100%

For Coca-Cola:

• ($16.90 − $62.00) ÷ $16.90 × 100%
• = −$45.10 ÷ $16.90 × 100%
• = −267%

Big negative number. Not a value play by Graham's standards.

Graham's target: Buy when margin of safety is at least +20 to 30%. That means the stock is trading at least 20% below the Graham Number.

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Let's Try One That Actually Passes

Not every stock fails. Let's calculate the Graham Number for Citigroup (C) as of March 2026:

• EPS (TTM): $7.42
• Book Value Per Share: $95.20
• Current Price: $68.50

Calculation:

• 22.5 × $7.42 × $95.20 = $15,893.52
• √$15,893.52 = $126.07

Margin of Safety:

• ($126.07 − $68.50) ÷ $126.07 × 100%
• = +45.7%

That's a 45% margin of safety — well above Graham's 20-30% threshold. By his criteria, Citigroup represents genuine value at this price.

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Another Example: Ford Motor Company (F)

• EPS (TTM): $1.33
• Book Value Per Share: $14.85
• Current Price: $12.85

Calculation:

• 22.5 × $1.33 × $14.85 = $444.44
• √$444.44 = $21.08

Margin of Safety:

• ($21.08 − $12.85) ÷ $21.08 × 100%
• = +39.0%

Another one that passes. Ford's stock is well below its Graham Number, giving you nearly 40% downside protection built in.

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The 5-Minute Workflow (Summary)

Here's the full process, condensed:

1. Look up the stock on Yahoo Finance
2. Find EPS (TTM) on the Statistics tab
3. Find Book Value Per Share (mrq) on the Statistics tab
4. Calculate: √(22.5 × EPS × BVPS)
5. Compare to current price: Is there a 20%+ margin of safety?
6. If yes: Dig deeper. This stock is worth researching.
7. If no: Move on or watchlist it for a better entry price.

Total time once you know where to look: under 5 minutes.

Or just use our Graham Number Calculator and let it do steps 1–5 automatically.

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When the Graham Number Doesn't Tell the Whole Story

The Graham Number is a starting filter, not a final verdict. Here's when to take it with extra caution:

Asset-light companies: Software, media, and brand-heavy companies often have tiny book values. Apple's Graham Number looks terrible because its tangible book value is low — but its earnings power is enormous. Graham's formula wasn't designed for 21st-century tech companies.

Cyclical businesses: A mining company at peak earnings will show a high Graham Number. Buy based on that and you might be catching a falling knife when the cycle turns. Use normalized (multi-year average) EPS for cyclical stocks.

Turnarounds: A company coming out of a rough patch might have very low current EPS. The Graham Number will look low, making the stock appear more overvalued than it is. Check the earnings trend before writing it off.

Banks and financial stocks: These work particularly well with the Graham Number because their book value is closely tied to real financial assets. Citigroup passing the test above is a good example.

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The Graham Number Is a Starting Line, Not a Finish Line

Every time I find a stock passing the Graham Number test, I do more homework:

• Is the business stable? Revenue and earnings growing or at least consistent?
• How much debt does it carry? Anything above a 0.5 debt-to-equity ratio makes me nervous.
• Has it paid a dividend — and maintained it through bad times?
• Is there a reason the market is selling it cheap? Is that reason temporary or permanent?

The Graham Number gives you a list of candidates. Your job is to figure out which candidates are genuinely undervalued versus broken companies that deserve to be cheap.

For a complete checklist, check out Benjamin Graham's 7 Criteria for Defensive Investors — this is the full framework the Graham Number comes from. And if you want to go deeper on what makes a stock worth holding, our guide to Margin of Safety explains why that buffer matters more than you think.

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Your Next Move

Now you know how to calculate the Graham Number. So put it to use.

Pick five stocks in your portfolio or watchlist. Look up the EPS and book value for each. Run the calculation. See which ones are trading below their Graham Number.

You might be surprised — or you might not be. Either way, you'll know where you stand.

→ Try the free Graham Number Calculator — No spreadsheet required. Just type in a ticker and get the result instantly.

→ See which stocks are passing the Graham Number screen right now

→ Learn how to layer in dividend income on top of value investing

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All financial data referenced is as of March 2026. This is educational content — not personalized investment advice. Stock prices and financial metrics change constantly. Always verify current data before making any investment decisions. Past performance does not guarantee future results.