Graham’s Valuation Calculator – Calculate the Intrinsic Value of a Stock

Use the modified Graham formula to estimate the fair value of a stock.

Current Stock Price ($)

Earnings Per Share (EPS) ($)

Growth Rate (%)

10-Year Bond Yield (%)

Investing in stocks requires understanding their fair value. Our Graham’s Valuation Calculator helps estimate a stock's intrinsic value using the modified Benjamin Graham formula. This formula considers earnings per share (EPS), expected growth rate, and bond yield to determine if a stock is undervalued or overvalued.

What is Graham’s Valuation Formula?

Benjamin Graham, known as the father of value investing, developed a simple yet powerful formula to estimate the fair value of a stock. The original formula was:

V = EPS × (8.5 + 2G)

where:

• V – intrinsic value of the stock
• EPS – earnings per share
• G – expected growth rate of EPS

However, this formula was later modified to adjust for interest rate fluctuations:

V = (EPS × (8.5 + 2G) × 4.4) / Y

where Y is the yield of a 10-year government bond, adjusting the valuation for interest rate changes.

How to Use the Graham’s Valuation Calculator?

Our calculator simplifies the process. Just enter the following values:

• Earnings Per Share (EPS) – the company's profit per share
• Growth Rate (%) – expected annual growth rate of EPS
• 10-Year Bond Yield (%) – current yield on government bonds
• Current Stock Price ($) – market price of the stock

Why Use Graham’s Formula?

Value investors use Graham’s formula to find undervalued stocks. If the intrinsic value is higher than the market price, the stock might be a good investment. Conversely, if it's lower, the stock may be overvalued.

Example Calculation

Let’s calculate the fair value of a stock:

• EPS: $5.00
• Growth Rate: 10%
• Bond Yield: 3%
• Current Price: $80

Applying the formula:

V = (5 × (8.5 + 2 × 10) × 4.4) / 3

Intrinsic Value = $209

Since the intrinsic value is higher than the stock price, it may be undervalued!

Limitations of Graham’s Formula

• Assumes a constant growth rate, which may not always be realistic.
• Not ideal for high-growth tech stocks.
• Requires an accurate bond yield for correct valuation.

Frequently Asked Questions (FAQ)

What is Benjamin Graham's investing strategy?

Graham focused on buying stocks trading below their intrinsic value, reducing risk and maximizing returns.

Does this formula work for all stocks?

It is best for stable companies with predictable earnings. High-growth tech stocks may need alternative valuation methods.

What if my stock is overvalued?

If the intrinsic value is lower than the market price, it may not be a good buy at that time.

Try Graham’s Valuation Calculator Now!

Use our free calculator to estimate if your stock is undervalued or overvalued before making an investment decision.

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