what is the graham number 
the graham number or benjamin graham s number measures a stock s fundamental value by taking into account the company s earnings per share eps and book value per share bvps 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 understanding the graham numberthe 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 figure is included in the calculation to account for graham s belief that the price to earnings p e ratio should not be over 15x and the price to book ratio should not be over 1 5x thus 15 x 1 5 22 5 the graham number can thus be alternatively calculated as 15 1 5 net income shares outstanding shareholders equity shares outstanding sqrt 15 times 1 5 times left frac text net income text shares outstanding right times left frac text shareholders equity text shares outstanding right 15 1 5 shares outstandingnet income shares outstandingshareholders equity essentially this second method of calculation is equivalent to the first wherein eps net income shares outstanding and book value is another term for shareholders equity the formula for graham number22 5 earnings per share book value per share sqrt 22 5 times text earnings per share times text book value per share 22 5 earnings per share book value per share 