Stock Intrinsic Value Calculator
Intrinsic value is what a stock is truly worth based on fundamentals — not what the market currently prices it at. When the market price is below intrinsic value, you have a margin of safety. This calculator uses the Graham Number and P/E analysis to estimate fair value.
Enter the stock's EPS, book value, current price, and growth expectations to get multiple valuation estimates and margin of safety analysis.
The Graham Number: Benjamin Graham's Defensive Valuation
Benjamin Graham — Warren Buffett's mentor and author of "The Intelligent Investor" — developed a simple formula for conservative investors: the maximum price a defensive investor should pay is the square root of (22.5 × EPS × Book Value Per Share). The 22.5 reflects his belief that no stock should have a P/E above 15 or a price-to-book ratio above 1.5 (15 × 1.5 = 22.5).
The Graham Number is conservative by design — it works best for mature, asset-heavy businesses in traditional industries. For technology companies, fast-growing businesses, or service companies with low book values, the Graham Number often produces unrealistically low values. Use it as one data point, not the final answer.
P/E Based Valuation
The simplest relative valuation: if a company earns $3.20/share and comparable companies in its sector trade at 18× earnings, the stock should be worth approximately $57.60 (18 × $3.20). This approach is most useful when comparing within an industry where companies have similar growth profiles and risk characteristics.
The P/E method breaks down for companies with negative earnings, cyclical businesses at peak earnings, or high-growth companies where the sector P/E doesn't reflect the individual company's growth rate. For these, a DCF or PEG ratio (P/E ÷ growth rate) is more appropriate.
Margin of Safety: Protecting Against Valuation Error
No valuation method is precise. Earnings estimates, growth rates, and discount rates are all assumptions that can be wrong. The margin of safety — buying at a meaningful discount to your estimated intrinsic value — provides a buffer against being wrong. Graham typically recommended a 25%–50% margin of safety. If your valuation estimate is $80 and you buy at $60, a 25% error in your estimate still leaves you at breakeven.
For a broader guide to value investing principles, see investing basics. For understanding how the CAGR of a stock return compares to alternatives, use the CAGR Calculator.
Frequently Asked Questions
What is intrinsic value?
The estimated true worth of a stock based on fundamentals (earnings, assets, growth), independent of market price. Value investors compare intrinsic value to market price to find stocks trading below their worth — the margin of safety. Valuation is inherently uncertain; use multiple methods and require a meaningful discount before buying.
What is the Graham Number?
Graham Number = √(22.5 × EPS × Book Value Per Share). Represents the maximum price a defensive investor should pay. Best for mature, asset-backed businesses. Often produces low values for growth companies or businesses with intangible-heavy balance sheets. It's a starting point, not a definitive answer.
What is margin of safety?
The gap between intrinsic value and current price. If your estimate is $80 and the stock trades at $60, the margin of safety is 25%. It protects against valuation errors and unexpected business deterioration. Graham recommended 25%–50% margins; the larger the uncertainty in the estimate, the larger the margin needed.
Is the Graham Number still useful?
For traditional, asset-heavy businesses (banks, industrials, utilities, consumer staples) — yes, it's a useful conservative valuation screen. For technology, growth, or service companies with low book values — less so. Modern analysts often supplement it with DCF models, EV/EBITDA multiples, and sector-specific metrics.
What P/E ratio is considered cheap?
The S&P 500's historical average P/E is approximately 15–17×. A stock with a P/E below 15 is often considered "value" territory. However, P/E must be evaluated relative to the company's growth rate (use PEG = P/E ÷ growth rate; under 1 is attractive) and sector peers. A low P/E can reflect genuine undervaluation or a struggling business.
Related Calculators
Sources & method
This calculator implements a discounted-cash-flow valuation — standard financial mathematics that no single body maintains as an official standard. The formula is shown on this page so you can verify it.
Not financial or tax advice. This is an educational estimator. It does not know your full situation, and tax rules change. Akshaya Panda, who builds and verifies these tools, is an engineer — not a financial adviser, accountant, or tax professional. Before acting on a result that matters, check it with someone licensed to advise you.