Graham Number Calculator (VND)
The Graham Number is a quick intrinsic-value screen devised by Benjamin Graham — Warren Buffett's mentor and the author of The Intelligent Investor. It estimates the maximum price a defensive investor should pay for a stock, distilling two of Graham's rules into a single figure: don't pay more than 15 times earnings per share (P/E ≤ 15) and don't pay more than 1.5 times book value (P/B ≤ 1.5). Multiply those two ceilings and you get the constant 22.5, which is why the formula collapses to the square root of 22.5 × EPS × BVPS.
The rule of thumb is direct: if the market price sits below the Graham Number, the stock may be undervalued and you have a margin of safety — the cushion between what you pay and the estimated worth. A price above the Graham Number signals the market is paying up relative to earnings and net assets. With an illustrative EPS of 5.000 VND and a book value per share (BVPS) of 40.000 VND, the Graham Number works out to 67.082 VND; at a market price of 60.000 VND the margin of safety is about 10.56%.
If you live and work in Vietnam and screen shares on HOSE or HNX, the calculator above takes your EPS, BVPS and the current market price — all in dong — and returns the Graham Number, the margin of safety and a quick verdict. One caveat governs the whole page: this is a crude screen that only makes sense for stable, consistently profitable companies with tangible assets — banks, consumer staples, utilities. It breaks down for fast-growing tech names, loss-making companies, and firms whose value is mostly intangible. Every input here is an illustrative assumption; pull real EPS and BVPS from audited financial statements before acting.
How the calculator computes the Graham Number
The core formula
Graham Number = √(22.5 × EPS × BVPS)
| Symbol | Meaning |
|---|---|
| EPS | Earnings per share over the trailing twelve months (5.000 VND) |
| BVPS | Book value per share = shareholders' equity / shares outstanding (40.000 VND) |
| 22.5 | Constant = max P/E of 15 × max P/B of 1.5 |
Why 22.5? Graham argued a defensive stock should not trade above a P/E of 15 or a P/B of 1.5. If both ceilings bind at once, then P/E × P/B = 15 × 1.5 = 22.5. Taking the square root of 22.5 × EPS × BVPS returns precisely the price at which both limits are satisfied simultaneously. The tool implements this formula exactly, so you can reconcile every figure with a pocket calculator.
Margin of safety
Margin of safety = (Graham Number − Market price) / Graham Number
This is the cushion between the estimated value and what you actually pay, expressed as a percentage. A positive margin means the price is below the Graham Number (potentially cheap); a negative one means it is above (potentially expensive). For the example: (67.082 − 60.000) / 67.082 = 10.56% — a modest positive cushion.
When the Graham Number breaks down
- Negative EPS or BVPS: the square root of a negative number is meaningless, so loss-making companies or firms with negative equity cannot be screened this way.
- High-growth companies: the formula deliberately ignores growth, so fast-growing tech stocks almost always exceed their Graham Number yet can still be sound investments.
- Asset-light businesses: for firms whose value lives in brands, patents or data, BVPS understates true worth.
Treat the Graham Number as a first-pass filter that quickly weeds out expensive stocks, not a final verdict. Always cross-check it against P/E, P/B, return on equity, debt levels and the industry outlook.
Worked example: a stock with EPS 5.000 VND, BVPS 40.000 VND, price 60.000 VND
Illustrative assumptions (not a real company's figures): trailing EPS of 5.000 VND, book value per share of 40.000 VND, market price of 60.000 VND.
Step 1 — compute the Graham Number: √(22.5 × 5.000 × 40.000) = √4.500.000.000 = 67.082 VND.
Step 2 — compare price to the Graham Number: the 60.000 VND price is below the 67.082 VND Graham Number, so on this screen the stock looks undervalued.
Step 3 — compute the margin of safety: (67.082 − 60.000) / 67.082 = 10.56%.
| Stock | EPS | BVPS | Graham Number | Market price | Margin of safety | Verdict |
|---|---|---|---|---|---|---|
| Example A (stable) | 5.000 | 40.000 | 67.082 | 60.000 | 10.56% | Possibly undervalued |
| Example B (expensive) | 4.000 | 20.000 | 42.426 | 80.000 | -88.56% | Possibly overvalued |
The contrast shows what the screen is telling you. Example A has a positive margin of safety of 10.56%: at 60.000 VND it still trades under the price Graham would allow. Example B has lower EPS and BVPS but a richer 80.000 VND price that exceeds its 42.426 VND Graham Number, leaving a negative -88.56% margin — a sign the market is paying up, possibly for growth the formula cannot see. Replace these with the real EPS and BVPS of the stock you are studying and confirm with other ratios. FiMo also has dividend-yield and stock-return calculators if you want a fuller picture.
Frequently asked questions
What is the Graham Number and what is it for?
The Graham Number is the maximum fair price a defensive investor should pay for a stock, proposed by Benjamin Graham. It folds two ceilings — P/E ≤ 15 and P/B ≤ 1.5 — into the constant 22.5 and computes √(22.5 × EPS × BVPS). Example: EPS of 5.000 VND and BVPS of 40.000 VND give a Graham Number of 67.082 VND. If the market price is below that figure, the stock may be undervalued and offers a margin of safety.
What is the Graham Number formula?
The formula is √(22.5 × EPS × BVPS), where EPS is earnings per share and BVPS is book value per share (shareholders' equity divided by shares outstanding). The 22.5 constant comes from a maximum P/E of 15 times a maximum P/B of 1.5. Example: √(22.5 × 5.000 × 40.000) = √4.500.000.000 = 67.082 VND. Both EPS and BVPS must be positive for the result to be meaningful.
How is the margin of safety calculated?
Margin of safety = (Graham Number − Market price) / Graham Number, expressed as a percentage cushion between estimated value and the price you pay. Positive means the price is below the Graham Number (potentially cheap); negative means it is above (potentially expensive). Example: (67.082 − 60.000) / 67.082 = 10.56%. Graham advised buying only with a wide enough cushion to absorb errors in your estimates.
Why does the formula use 22.5?
Because 22.5 = a maximum P/E of 15 × a maximum P/B of 1.5. Graham held that a defensive stock should trade at no more than 15 times earnings and no more than 1.5 times book value. When both ceilings bind simultaneously, their product is 22.5. Taking the square root of 22.5 × EPS × BVPS returns exactly the price that satisfies both limits at once — that price is the Graham Number.
Does the Graham Number work for bank or tech stocks in Vietnam?
It works best for stable, consistently profitable companies with tangible assets — banks, consumer staples and utilities usually fit. It does not work well for fast-growing tech names, because the formula deliberately ignores growth, so those stocks almost always exceed their Graham Number while still being potentially good investments. For asset-light firms whose value lies in brands or patents, BVPS understates real worth, making the Graham Number unreliable.
How is the Graham Number different from P/E and P/B?
P/E and P/B are two separate ratios; the Graham Number combines both into a single price ceiling. Instead of asking "what P/E is cheap?", it answers "what is the most I should pay?" so that P/E ≤ 15 and P/B ≤ 1.5 both hold. That makes it a fast filter, but by collapsing two metrics into one it hides detail — always review the actual P/E, P/B, return on equity and debt of the stock rather than relying on one number.
If the price is above the Graham Number, should I sell?
Not necessarily. A price above the Graham Number only tells you the stock is expensive on this conservative screen, not that you should sell. Plenty of quality companies trade above their Graham Number for years thanks to growth the formula cannot capture. Example B on this page has a 80.000 VND price above its 42.426 VND Graham Number (a -88.56% margin). Treat it as a prompt to dig deeper — check growth, ROE, debt and the industry — rather than a trading signal.