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Graham Number Valuation

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Graham Number

$34.11

Stock price: $333.69

Fair value below stock price

The Graham Number provides a conservative intrinsic value benchmark based on earnings and tangible book value. It is most appropriate for profitable companies with meaningful tangible assets.

Price vs Graham Number

Current market price compared with Graham-style value

$333.69Current$34.11Graham

Valuation Summary

Notes

• The Graham Number is far below the current price. This often happens for asset-light or high-growth companies where tangible book value is often not a good measure of economic value.

Graham Number Formulas

Tangible Book Value per Share
Tangible Book Value per Share (TBVPS)=Tangible Book ValueShares Outstanding \text{Tangible Book Value per Share (TBVPS)} = \frac{\text{Tangible Book Value}} {\text{Shares Outstanding}}
Graham Number
Graham Number=22.5×EPS×TBVPS \text{Graham Number} = \sqrt{ 22.5 \times EPS \times TBVPS }
Graham Constant
22.5=15×1.5 22.5 = 15 \times 1.5
Valuation Gap
Valuation Gap=Graham NumberCurrent Price−1 \text{Valuation Gap} = \frac{\text{Graham Number}} {\text{Current Price}} -1

What is the Graham Number?

The Graham Number provides a conservative valuation benchmark based on a company's earnings and tangible asset value.

It combines Earnings per Share (EPS) with Tangible Book Value per Share to estimate a price level that reflects both profitability and balance-sheet support.

Unlike a Discounted Cash Flow model, the Graham Number does not forecast future cash flows or growth. It uses current financial fundamentals to provide a simple value-investing benchmark.

How the Graham Number Model Works

Benjamin Graham's valuation model combines a company's current earnings per share and tangible book value per share to estimate a conservative intrinsic value. Unlike discounted cash flow models, it does not forecast future growth or cash flows, making it a simple benchmark for mature, profitable businesses with meaningful tangible assets.

Determine EPS
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Calculate Tangible Book Value per Share (TBVPS)
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Apply Graham Formula
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Compare With Market Price

Key Model Assumptions

• The model requires positive Earnings per Share and a positive Book Value per Share measure.
• Earnings per Share uses trailing twelve-month (TTM) earnings when available, with the latest annual EPS used as a fallback.
• Tangible Book Value is preferred because it excludes goodwill and other intangible assets. If Tangible Book Value is unavailable, the model may use Book Value instead.
• The Graham Number follows Benjamin Graham's traditional formula.
• The constant 22.5 reflects a P/E ratio of 15 and a Price-to-Book ratio of 1.5.
• The model is most meaningful for profitable companies with substantial tangible assets.
• Asset-light and high-growth companies may not be well represented by this valuation method.

Step 1 — Calculate Tangible Book Value per Share

Tangible Book Value per Share = Tangible Book Value / Shares Outstanding
Tangible Book Value per Share = $87.2B / 14.69B
= $5.94

Tangible Book Value per Share represents Apple's tangible net assets attributable to each outstanding share after excluding goodwill and other intangible assets.

Step 2 — Apply the Graham Number Formula

Graham Number = √(22.5 × EPS × Tangible Book Value per Share)
TTM EPS = $8.71
Graham Number = √(22.5 × $8.71 × $5.94)
= $34.11
22.5 = 15 × 1.5
15 = Maximum P/E Ratio
1.5 = Maximum Price-to-Book Ratio

The Graham Number combines Earnings per Share with the selected Book Value per Share measure to estimate a conservative valuation benchmark.

The model uses trailing twelve-month (TTM) EPS as the earnings input, while Tangible Book Value per Share is based on the latest available balance-sheet value.

The constant 22.5 reflects Benjamin Graham's traditional limits of a P/E ratio of 15 and a Price-to-Book ratio of 1.5.

Step 3 — Compare With the Current Market Price

Valuation Gap = Graham Number / Current Price − 1
Valuation Gap = $34.11 / $333.69 − 1
= -89.8%

The Graham Number is compared with the current stock price to show whether the market price trades above or below this conservative valuation benchmark.