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Does anyone here regularly use the Graham Number to calculate value of potential stock buys?
Benjamin Graham , father of value investing, used this number to put a value on individual companies, preferably low or mid cap. He then would purchase those that were selling at least 1/3rd below the number .
To calculate take the SQRT of 22.5 x TTM EPS x BVPS
Translation : Square Root of 22.5 x Trailing 12 month Earnings Per Share x Book Value Per share
Graham came up with the 22.5 as the product of the P/E ratio which he thought shouldn't exceed 15 times the price/book value ratio that he said shouldn't exceed 1.5.
I was researching high dividend stocks and came across one that also had a Graham Number about 30% above its current price.
Many of these stocks are suppressed in price due to rumors or just a lousy market or sector.
Seeking Alpha seems to regularly list stocks selling under Graham's Number.
Try it on some of your stocks. It's fun and might get you worried or happy about your picks.
* there are several examples of "Graham Number" and "Graham's Number" if you google the name. Some pertain to stocks others don't.
-------------billy
Benjamin Graham , father of value investing, used this number to put a value on individual companies, preferably low or mid cap. He then would purchase those that were selling at least 1/3rd below the number .
To calculate take the SQRT of 22.5 x TTM EPS x BVPS
Translation : Square Root of 22.5 x Trailing 12 month Earnings Per Share x Book Value Per share
Graham came up with the 22.5 as the product of the P/E ratio which he thought shouldn't exceed 15 times the price/book value ratio that he said shouldn't exceed 1.5.
I was researching high dividend stocks and came across one that also had a Graham Number about 30% above its current price.
Many of these stocks are suppressed in price due to rumors or just a lousy market or sector.
Seeking Alpha seems to regularly list stocks selling under Graham's Number.
Try it on some of your stocks. It's fun and might get you worried or happy about your picks.
* there are several examples of "Graham Number" and "Graham's Number" if you google the name. Some pertain to stocks others don't.
-------------billy