Graham number / Graham ceiling
Educational ceiling from EPS and book value: √(22.5 × EPS × BVPS).
Definition
The simplified Graham approach estimates a ceiling as √(22.5 × EPS × book value per share). The 22.5 constant comes from max P/E 15 × max P/B 1.5. It fits operating companies better than pure yield REITs.
Tools and guides
Related terms
- Price ceiling— Your personal maximum buy price for a holding.
- EPS (earnings per share)— Net income divided by shares outstanding.
- Book value per share— Equity divided by shares outstanding.