Answer first
What this calculator tells you
Calculate the Graham number and the margin of safety at the current price. Use it as a screening ceiling on price, then read the business behind the numbers. Formula: Graham number = √(22.5 × EPS × book value per share); margin of safety = (Graham number − price) ÷ Graham number. At the worked-example inputs, the graham number is $52. Holding every other input steady, moving earnings per share from $3.20 to $4.80 moves the result from $46 to $57.
Transparent method
The formula
Use it as a screening ceiling on price, then read the business behind the numbers.
Worked example
Example inputs
How to interpret the result
Benjamin Graham's number sets a ceiling on what a defensive investor should pay: the square root of 22.5 times earnings per share times book value per share. The 22.5 is a P/E of 15 times a price-to-book of 1.5. With $4 of earnings and $30 of book value, the ceiling is about $52, so a $45 price leaves a margin of safety near 13 percent.
At the worked-example inputs the graham number is $52. It rises with earnings per share and book value per share; current share price does not move it.
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results.
Before you rely on it
What to check
Use normalized earnings, not a peak year. One unusually strong year inflates the ceiling and makes almost any price look safe.
The common error
Where people go wrong with graham number calculator
Buying anything under the number. It ignores growth and debt, and it was built for stable industrial companies, so it screens out most modern high-growth firms by design.
Sensitivity evidence
How earnings per share changes the graham number
Holding every other input at the worked-example value, moving earnings per share from $3.20 to $4.80 moves the graham number from $46 to $57: a spread of $10, or 20% of the worked-example result.
| Earnings per share | Graham number | Margin of safety at the current price |
|---|---|---|
| $3.20 | $46 | 3.2% |
| $3.60 | $49 | 8.7% |
| $4.00worked example | $52 | 13.4% |
| $4.40 | $54 | 17.4% |
| $4.80 | $57 | 20.9% |
Every input, tested
Which input moves the graham number most
Of the 3 inputs, earnings per share moves the graham number most ($5.20 across the range tested) and book value per share moves it least ($5.20). Current share price does not change it at all.
| Input | Tested from | To | Graham number at each end | Swing |
|---|---|---|---|---|
| Earnings per share | $3.60 | $4.40 | $49 to $54 | $5.20 (10%) |
| Book value per share | $27 | $33 | $49 to $54 | $5.20 (10%) |
| Current share price | $41 | $50 | $52 to $52 | none |
Two variables at once
Graham number by earnings per share and book value per share
Across the grid the graham number runs from $42 to $62. Moving earnings per share from $3.20 to $4.80 shifts it by $10 at the middle column, and moving book value per share from $24 to $36 shifts it by $10 at the middle row, so neither is the bigger lever here.
| Earnings per share \ Book value per share | $24 | $30 | $36 |
|---|---|---|---|
| $3.20 | $42 | $46 | $51 |
| $3.60 | $44 | $49 | $54 |
| $4.00 | $46 | $52 | $57 |
| $4.40 | $49 | $54 | $60 |
| $4.80 | $51 | $57 | $62 |
The highlighted cell is the worked example: $52.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Earnings per share | $4.00 | Enter the earnings per share used in this calculation. |
| Book value per share | $30 | Enter the book value per share used in this calculation. |
| Current share price | $45 | Enter the current share price used in this calculation. |
| Graham number | $52 | |
| Margin of safety at the current price | 13.4% | |
Inputs, definitions and assumptions
Earnings per share
Enter the earnings per share used in this calculation. The prefilled worked-example value is $4.00.
Book value per share
Enter the book value per share used in this calculation. The prefilled worked-example value is $30.
Current share price
Enter the current share price used in this calculation. The prefilled worked-example value is $45.
How to use this calculator
- 1Verify the inputs. Gather earnings per share, book value per share and current share price from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the graham number at $52. Store your own version of it as Scenario A.
- 3Test one change. Start with earnings per share, the input with the biggest effect here: moving earnings per share from $3.60 to $4.40 takes the graham number from $49 to $54, a swing of 10% of the worked-example figure.
- 4Check the extremes. At half the example earnings per share ($2.00) the graham number is $37; at double ($8.00) it is $73.
People also ask
Frequently asked questions
How do you calculate graham number?
Graham number = √(22.5 × EPS × book value per share); margin of safety = (Graham number − price) ÷ Graham number. Enter earnings per share in dollars, book value per share in dollars and current share price in dollars. At the worked-example inputs the graham number is $52.
What does the graham number result mean?
Use it as a screening ceiling on price, then read the business behind the numbers. At the worked-example inputs the graham number is $52. It rises with earnings per share and book value per share; current share price does not move it.
How much does earnings per share change the graham number?
Holding every other input at the worked-example value, moving earnings per share from $3.20 to $4.80 moves the graham number from $46 to $57, a spread of $10.
What are the limits of this graham number calculator?
Investment returns are uncertain; taxes, fees, volatility and cash-flow timing can materially change results. The tables on this page test earnings per share only from $3.20 to $4.80; a value outside that range is not tabulated here.
Which input moves the graham number most in the graham number calculator?
Ranked by how far each moves the graham number across the range tested: earnings per share ($5.20, 10%) and book value per share ($5.20, 10%). Current share price does not change it.
If I double earnings per share in the graham number calculator, does the graham number double?
Doubling it from $4.00 to $8.00 takes the graham number from $52 to $73, which is 1.41 times the worked-example figure. So it grows, but by less than double. Halving it to $2.00 gives $37.
How much does book value per share matter in the graham number calculator?
The worked example uses $30. Holding every other input at its worked-example value, moving book value per share from $27 to $33 takes the graham number from $49 to $54, a swing of 10% of the worked-example figure.
How much does current share price matter in the graham number calculator?
The worked example uses $45. The graham number does not depend on current share price; it moves the margin of safety at the current price from 21.1% to 3.8% instead when current share price goes from $41 to $50.
Which inputs change the margin of safety at the current price in the graham number calculator?
At the worked-example inputs it is 13.4%. Earnings per share takes it from 8.7% to 17.4%, book value per share takes it from 8.7% to 17.4% and current share price takes it from 21.1% to 3.8%.
Sources and evidence
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