Intrinsic Value Calculator (Graham)
Calculate the intrinsic value (fair price) of a stock based on Benjamin Graham's formula.
ℹ️ How Graham's Formula Works
Benjamin Graham's formula for calculating the intrinsic value of a stock is one of the most well-known in the investment world. It aims to estimate the 'fair price' of a stock based on its fundamentals, such as earnings and book value. The formula is:
Intrinsic Value = √ (22.5 × EPS × BVPS)
The value 22.5 is a multiplier defined by Graham, resulting from the product of an ideal P/E (Price/Earnings) of 15 and an ideal P/BV (Price/Book Value) of 1.5. This tool allows you to adjust these ideal values to refine your analysis.
Facts about Graham Formula
- Benjamin Graham is considered the father of value investing.
- The formula estimates intrinsic value based on EPS and BVPS.
- Graham suggested a multiplier of 22.5 for defensive investors.
- The method works best for steady, profitable industrial companies.