How to Use This Calculator
This tool estimates a stock’s underlying value based on fundamentals, not market hype. Here is a quick 3-step guide to running your valuation:
Step 1: Grab Your Stock’s Numbers
Look up your target ticker on Yahoo Finance, Google Finance, or Finviz and plug in these 5 values:
- Current Stock Price ($): Today’s market price per share.
- Trailing Twelve Months EPS ($): Look for EPS (TTM) on Yahoo Finance. This is the company’s net profit per share over the last 12 months.
- Expected 5-Yr Growth Rate (%): Analyst forecasts for annual earnings growth over the next 5 years (you can find this under the Analysis tab on Yahoo Finance, or use a realistic baseline like 8%–12%).
- Book Value Per Share – BVPS ($): Located under the Statistics tab. This represents the net value of the company’s physical assets per share.
- Target Margin of Safety (%): Your safety discount. Value investors usually set this between 20% and 30% to build in a cushion against bad news or market pullbacks.
Step 2: Understanding Your Results & Formulas
Once you hit calculate, the tool generates three key valuation numbers:
1. Graham Revised Fair Value ($)
Formula:
Fair Value = EPS × (8.5 + 2 × Growth Rate)
- What it tells you: This is the baseline fundamental value of one share based on earnings and future growth. (The number
8.5is Graham’s standard P/E baseline for a flat, zero-growth business). - How to use it: Compare this directly to the stock’s market price. If the calculated Fair Value is higher than today’s price, the stock is trading at a discount.
2. The Graham Number Ceiling ($)
Formula:
Graham Number = Square Root of (22.5 × EPS × BVPS)
- What it tells you: This is a defensive upper price cap. It looks at hard balance sheet assets and current earnings power so you don’t overpay for hype.
- How to use it: Think of this as a strict guardrail; defensive value investors avoid buying above this ceiling price.
3. Recommended Entry Price ($)
Formula:
Recommended Entry Price = Fair Value × (1 - Margin of Safety %)
- What it tells you: This is your target buy price. It takes the Fair Value and subtracts your chosen safety discount.
- How to use it: You don’t need to do any manual math here; just drag the Margin of Safety slider to your desired cushion (e.g., 25%), and the calculator will automatically output your target entry price.
Example: If a stock’s Fair Value comes out to $100 and you choose a 20% Margin of Safety, your Recommended Entry Price is $80. Buying at $80 gives you a $20 buffer if the market drops or earnings slip.
Step 3: Check Your Valuation Verdict
- 🟢 UNDERVALUED (Buy Candidate): Today’s market price is at or below your Recommended Entry Price. The stock meets your margin of safety!
- 🔴 OVERVALUED (Wait / Watchlist): Today’s price is higher than your Recommended Entry Price. The stock is trading at a premium, so consider putting it on your watchlist for a market pullback.
Pro Tip for Beginners
Never rely on a single metric when buying stocks! Always pair quantitative valuation tools with qualitative research—such as checking the company’s debt levels, competitive advantage (moat), and management stability.
Need help finding these metrics or learning how valuation works? Read our full guide on How to Analyze & Value a Stock in 15 Minutes ➔