Benjamin Graham's Intrinsic Value Calculator

Summary:

You can use the calculator below to calculate the intrinsic value of a stock based on Benjamin Graham’s formula. However, remember that Graham didn’t recommend using this formula. He simply provided it as a way to approximate the valuation methods popular in his time and to illustrate how unrealistic market growth expectations tend to be.

This calculator uses the formula: Intrinsic Value = Earnings per Share (EPS) x (8.5 + 2 * Expected Annual Growth Rate)

Benjamin Graham's Original Intrinsic Value Calculator

Earnings Per Share (EPS)

Expected Growth Rate (%)

Intrinsic Value: Enter your info to calculate the value

IMPORTANT: This calculator uses an updated version of Benjamin Graham's formula V = {EPS x (8.5 + 2g). As Benjamin Graham himself warned, be wary of simple forecasting formulas like this. They are only meant as a tool to inform decisions on what the upper limit of a stock price may be. Please conduct further research or consult a financial advisor before making investment decisions.

Benjamin Graham’s updated intrinsic value calculator

This calculator used the formula: V = {EPS x (8.5 + 2g) x 4.4} / Y. It takes into account the minimum return Graham was willing to accept for the risk of investing (4.4) and the return provided by 20-year AAA corporate bonds (Y).

Benjamin Graham's Updated Intrinsic Value Calculator

Earnings Per Share (EPS)

Expected Growth Rate (%)

Yield on AAA Corporate Bonds (%)

Intrinsic Value: Enter your info to calculate the value

IMPORTANT: This calculator uses an updated version of Benjamin Graham's formula V = {EPS x (8.5 + 2g) x 4.4} / Y. As Benjamin Graham himself warned, be wary of simple forecasting formulas like this. They are only meant as a tool to inform decisions on what the upper limit of a stock price may be. Please conduct further research or consult a financial advisor before making investment decisions.

One of the most recognized formulas associated with Graham is V = EPS x (8.5 + 2g). However, it’s important to understand that Graham mentioned this formula in “The Intelligent Investor” only briefly, intending to illustrate the fallacy in market growth expectations.

Graham explicitly provided two warnings for this formula.

Firstly, he clarified that it does not offer a genuine intrinsic value for stocks.
Secondly, he emphasized that the formula should be seen only as an illustrative tool, highlighting that growth rate projections are often unreliable.

Unfortunately, this formula is often misapplied today, largely due to its misrepresentation in recent editions of the book.

Key takeaways

Benjamin Graham’s Intrinsic Value Formula emphasizes rational valuation over market sentiment.
The formula incorporates EPS, expected growth rate, and margin of safety to calculate intrinsic value.
It minimizes risks, encourages long-term perspective, and fosters objective decision-making.
Adaptations are necessary due to evolving market dynamics and complex businesses.
Modern investors combine the formula with other metrics for comprehensive assessments.

View Article Sources

Value Avatar Benjamin Graham – Library of Congress
Rediscovering Benjamin Graham – Columbia University
The Intelligent Investor, Revised Edition 2006 – Benjamin Graham
Technical Analysis – SuperMoney
Intrinsic Value – SuperMoney

Andrew Latham

Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.