Free Intrinsic Value Calculator
Estimate the true worth of a stock using the legendary Benjamin Graham formula. This free online tool helps you find undervalued companies by calculating their intrinsic value with a revised, modern approach. Learn more below.
How to Use This Calculator
Why Intrinsic Value Matters
Intrinsic value is the actual worth of a company, independent of its current stock price. Note that price is what you pay, value is what you get. By knowing the intrinsic value, you can determine if a stock is trading at a discount (margin of safety) or a premium.
The Modern Graham Formula
V = (EPS × (8.5 + 1g) × 4.4 (adjust with actual value of bond yields)) / Y
Benjamin Graham originally proposed a multiplier of 2g (2 × Growth Rate). However, in today's mature market environment, we use 1g to be more conservative and realistic. This adjustment helps avoid overvaluing high-growth stocks.
Formula Inputs
| Input | Description |
|---|---|
| EPS | Earnings Per Share (Trailing 12 Months). Found on the Income Statement. |
| Growth (g) | Expected annual growth rate (%) for the next 7-10 years. |
| Bond Yield (Y) | Current yield on AAA corporate bonds (default 4.4%). |
Find Undervalued Stocks
Ready to apply the Benjamin Graham formula to real companies? Use our advanced stock screener to filter for quality stocks, high growth, and other characteristics.
The Benjamin Graham Blueprint: Mastering the Intrinsic Value Formula
Benjamin Graham, the father of value investing and Warren Buffett's mentor, believed that every investment should have a margin of safety. His formula for intrinsic value is a timeless tool designed to help investors identify stocks that are trading for less than they are actually worth.
The Core Philosophy
Graham's approach focuses on the tangible power of a business—its earnings and its growth potential. By calculating a "fair price" based on these fundamentals, you can avoid the emotional traps of the stock market's daily price swings.
Modern Revisions
While the original formula was written decades ago, modern value investors use an adjusted version. We incorporate AAA bond yields to account for the current interest rate environment, ensuring the valuation reflects today's opportunity costs.
Key Components of the Formula
Earnings Per Share (EPS)
The starting point. We use the trailing 12 months (TTM) earnings to establish the current profitability baseline of the company.
Growth Multiplier (g)
Graham suggested a base P/E of 8.5 for a no-growth company. The "g" represents the expected annual growth rate over the next 7-10 years.
Bond Yield Adjustment
By dividing the result by current bond yields, we normalize the valuation against "risk-free" or low-risk alternatives in the market.
The Margin of Safety
Calculating the intrinsic value is only the first step. Graham taught that you should only buy if the market price is significantly lower (e.g., 20-30% lower) than the formula's value. This "gap" protects you if your growth estimates are a bit too optimistic.
Best For
- Established, profitable companies.
- Conservative investors seeking stability.
- Filtering out overhyped "meme stocks."
- Quick semi-mechanical valuation checks.
A Simple Rule of Thumb
If the Graham Value is $100 and the stock is trading at $120, you might want to wait. If it's trading at $70, you've potentially found a bargain that the rest of the market has missed.
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Graham Intrinsic Value FAQ
- The Benjamin Graham formula calculator is a tool used by value investors to estimate the intrinsic value of a growth stock. It is based on the formula: V = EPS × (8.5 + 2g), where 'g' is the growth rate. However, modern revisions often adjust the formula to reflect current interest rates.
- The classic Graham formula is V = EPS × (8.5 + 2g) × 4.4 / Y, where V is value, EPS is earnings per share, 8.5 is the P/E base for a no-growth company, g is the growth rate, 4.4 is the average yield of AAA corporate bonds in 1962, and Y is the current yield on AAA corporate bonds.
- Yes, but with modifications. Graham himself revised his formula over time. The modern version often uses a stricter growth multiplier (1g instead of 2g) to be more conservative, reflecting the lower-growth reality of many mature companies today.
- A good intrinsic value is one that is significantly higher than the current market price of the stock, offering a 'margin of safety'. Graham recommended buying stocks when they are trading at least 30% below their calculated intrinsic value.
- To be more conservative. The original 2g multiplier was quite aggressive for high-growth estimates. Reducing it to 1g aligns better with modern value investing principles, prioritizing safety and realistic growth expectations.