Stock Market Glossary

Graham number

Benjamin Graham's rule of thumb for valuing asset values.

In brief: Benjamin Graham's rule of thumb for valuing asset values.

Meaning in practice

Graham Number = √(22.5 × EPS × Book Value per Share). If the price is lower, a share is considered cheap according to this conservative logic. Today it is more of a historical tool, but didactically valuable.

Context for investors and traders

When analysing a company, this term is meaningful only alongside the business model, industry and development across several reporting periods. One-off effects, accounting choices and the corporate cycle can move individual metrics.

How to use this in practice

Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.

What to keep in mind

Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.

What does Graham number mean in simple terms?

Benjamin Graham's rule of thumb for valuing asset values.

When is this term relevant to investors?

Compare the development with earlier reports and relevant peers. Look beyond the absolute number to cash flow, debt and the assumptions behind management guidance.

What should I check before acting on Graham number?

Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.

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