Graham Number

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Dictionary Says

Definition of 'Graham Number'

A figure that measures a stock's fundamental value by taking into account the company's earnings per share and book value per share. The Graham number is the upper bound of the price range that a defensive investor should pay for the stock. According to the theory, any stock price below the Graham number is considered undervalued, and thus worth investing in. The formula is as follows:
Investopedia Says

Investopedia explains 'Graham Number'

The Graham number is named after the "father of value investing," Benjamin Graham. It is used as a general test when trying to identify stocks that are currently selling for a good price. The 22.5 is included in the number to account for Graham's belief that the price to earnings ratio should not be over 15 and the price to book ratio should not be over 1.5 (15 x 1.5 = 22.5). It does leaves out many fundamental characteristics which make up a good investment, and is not effective for the majority of medium- to large-cap stocks.

For example, if the earning per share is $1.50, book value per share is $10, the Graham number would be 18.37. If the stock price is $16, you should buy the stock. If the stock price is $19, and you own it, you should sell the stock.

Search results for

'Graham Number'

  • 3 Undervalued Stocks Ready to Run

    http://stocks.investopedia.com/stock-analysis/moneyshow/3UndervaluedStocksReadytoRun.aspx
    ... Graham created an equation to calculate the maximum fair value for a stock, referred
    to as the “Graham Number.” Any stock trading at a significant discount ...

  • Kohl's Meets Ben Graham's Most Important Rules

    http://stocks.investopedia.com/stock-analysis/2011/Kohls-Meets-Ben-Grahams-Most-Important-Rules-KSS-M-TJX-SHLD-JCP0426.aspx
    ... None of the companies meets the 4.5% required under Graham's system. Therefore,
    instead of using rule number three, I'll go with rule number seven, which calls ...

  • Rocky Brands: Not So Rocky Anymore!

    http://stocks.investopedia.com/stock-analysis/2011/Rocky-Brands-Not-So-Rocky-Anymore-RCKY-TBL-WWW-BOOT-WEYS-PNC-VFC0630.aspx
    ... Finally, there's something called the "Graham Number" which looks for stocks trading
    at less than a price-to-book of 1.5 and price-to-earnings of 15. ...

  • Big 5 Sporting Goods Is Risky But Rewarding

    http://stocks.investopedia.com/stock-analysis/2011/Big-5-Sporting-Goods-Is-Risky-But-Rewarding-BGFV-DKS-HIBB-PETM-BBY0824.aspx
    ... Doing a quick calculation using the Graham Number, I get a fair value of $11.
    However, that's based on a trailing 12-month EPS of 76 cents. ...

  • 5 Consumer Discretionary Stocks Ben Graham Would Love

    http://stocks.investopedia.com/stock-analysis/2010/5-Consumer-Discretionary-Stocks-Ben-Graham-Would-Love-JAHDIIBLTMCENTCJR0125.aspx
    ... Read The Intelligent Investor: Benjamin Graham.) ... With over $2.2 billion in annual
    revenue in 2009, it's looking to improve on that number in 2010. ...

  • The Greatest Investors: Benjamin Graham | Investopedia

    http://www.investopedia.com/university/greatest/benjamingraham.asp
    ... that each of the portfolios varied greatly in the number and type of stocks, but
    what did not vary was the managers' adherence to Graham's investment principles ...

  • Take On Risk With A Margin of Safety

    http://www.investopedia.com/articles/financial-theory/08/margin-of-safety.asp
    ... In this scenario, we have a gross A/R number. ... Paying half of a company's net-net
    value was Graham's goal, and at most, he would pay two-thirds of a company's ...

  • The Greatest Investors: Warren Buffett | Investopedia

    http://www.investopedia.com/university/greatest/warrenbuffett.asp
    ... These two years of working side-by-side with Graham and analyzing hundreds of ... thinking
    is that the business world is divided into a tiny number of wonderful ...

  • Top 5 All-Time Best Mutual Fund Managers

    http://www.investopedia.com/articles/mutualfund/08/top-mutual-fund-managers.asp
    ... John Train reported in "The Money Masters" (2000) that Graham's fund, the
    Graham-Newman Corporation ... for Price are not very useful as he managed a number of ...

  • Options Trading Volume And Open Interest

    http://www.investopedia.com/articles/optioninvestor/04/060904.asp
    ... When options have large open interest, it means they have a large number of buyers
    and sellers, and an active secondary market will increase the ... Jim Graham. ...

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