Company's earnings per share (annual)

Company's book value per share

Key Components:

• EPS: Earnings per share (annual)
• BVPS: Book value per share
• 22.5: Graham's conservative multiplier

Interpretation:

• Stock price below Graham Number = potentially undervalued
• Stock price above Graham Number = potentially overvalued
• Consider other factors before making investment decisions

Best Practices:

• • Use with profitable companies (positive EPS)
• • Combine with other valuation methods
• • Consider industry averages
• • Use annual EPS, not quarterly
• • Verify book value accuracy

Limitations:

• • Not suitable for growth stocks
• • Doesn't work for loss-making companies
• • May undervalue intangible assets
• • Based on historical data
• • Conservative approach may miss opportunities