Intrinsic Value Calculator

Estimate a stock's fair value per share with Benjamin Graham's classic intrinsic value formula, then compare it to the current market price to see the margin of safety.

Quick Facts

Formula
V = EPS x (8.5 + 2g) x 4.4 / Y
g and Y are entered as plain percentage numbers (8 for 8%), not decimals.
Origin
Benjamin Graham, "The Intelligent Investor"
8.5 is Graham's assumed P/E for a no-growth company; 4.4% was the AAA bond yield when he devised the formula, used here as a fixed normalizing constant.

Your Results

Calculated
Intrinsic value per share
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Graham formula fair value estimate
Margin of safety
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(Intrinsic value - price) / intrinsic value
Value vs. market price
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Intrinsic value minus current price
Graham multiplier
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Implied P/E: 8.5 + 2g

Ready

Enter EPS, growth rate, bond yield, and market price, then press Calculate.

How the Intrinsic Value Calculator works

This calculator estimates a stock's fair value per share using the intrinsic value formula popularized by Benjamin Graham in The Intelligent Investor. It converts a company's current earnings, an expected growth rate, and the going yield on high-grade corporate bonds into a single dollar figure you can compare against the market price.

The formula

For earnings per share EPS, an expected annual growth rate g (entered as a whole percentage number, e.g. 8 for 8%), and the current AAA corporate bond yield Y (also as a whole percentage number), the intrinsic value per share is:

V = EPS × (8.5 + 2g) × 4.4 / Y

The constant 8.5 is the price-to-earnings multiple Graham assigned to a company with zero growth. The term (8.5 + 2g) scales that multiple up for expected growth. The 4.4 is fixed at the AAA corporate bond yield from the era Graham published the formula (1962) and is kept as a normalizing constant so the formula produces comparable multiples; dividing by the current bond yield Y adjusts the result for today's interest-rate environment — a higher prevailing bond yield lowers the intrinsic value, all else equal, because a bond alternative is paying more.

Worked example

Take a company with EPS of $5.00, an expected growth rate of 8%, and a current AAA bond yield of 4.4%. The Graham multiplier is 8.5 + (2 × 8) = 24.5. Intrinsic value is $5.00 × 24.5 × 4.4 / 4.4 = $122.50 per share. If the stock trades at $100, that is a margin of safety of about ($122.50 - $100) / $122.50 ≈ 18.4%.

Margin of safety

Margin of safety is the percentage gap between intrinsic value and market price: (intrinsic value − price) / intrinsic value. Graham generally looked for a margin of safety of at least 20-30% before considering a stock attractively priced, on the reasoning that a large buffer protects against errors in the growth or earnings estimate. A negative margin of safety means the market price is above the calculated intrinsic value.

Limitations to keep in mind

  • The formula assumes stable, positive earnings. It is not designed for companies with negative or highly erratic EPS, or early-stage companies with no earnings yet.
  • The growth rate g is a single assumption for the whole period — small changes in g move the result a lot, since g is multiplied by 2 inside the parentheses.
  • Graham later suggested the formula overstates value for high-growth companies if g is a long-run, aggressive figure rather than a realistic 7-10 year estimate.
  • This is one valuation heuristic among many (others include discounted cash flow and dividend discount models) and should not be the sole basis for a buy or sell decision.

Getting accurate inputs

  • Use trailing twelve-month EPS (or normalized EPS if recent earnings were unusually high or low) rather than a single volatile quarter.
  • Enter the growth rate and bond yield as plain percentage numbers (8 for 8%), not decimals (0.08) — the calculator expects whole percentage figures to match the original formula.
  • A common substitute for the current AAA bond yield is the yield on long-term high-grade corporate bond indices published by financial data providers; use the most recent figure you have.

Frequently Asked Questions

What formula does this calculator use?
It uses Benjamin Graham's intrinsic value formula: V = EPS × (8.5 + 2g) × 4.4 / Y, where EPS is earnings per share, g is the expected annual growth rate as a percentage number, and Y is the current AAA corporate bond yield as a percentage number. The 8.5 and 4.4 are fixed constants from Graham's original formulation.
What counts as a good margin of safety?
Margin of safety is (intrinsic value − market price) / intrinsic value. Graham generally favored a margin of safety of 20-30% or more before treating a stock as attractively priced, since a large buffer helps absorb errors in the earnings or growth assumptions. A margin near zero or negative suggests the stock is trading close to or above the calculated intrinsic value.
Why does the growth rate matter so much?
Growth rate g is multiplied by 2 and added to 8.5 to form the Graham multiplier, so a change from 5% to 10% growth moves the multiplier from 18.5 to 28.5 — more than a 50% increase — which flows straight through to the intrinsic value. Small differences in how you estimate future growth can swing the result substantially, so it is worth testing a conservative and an optimistic growth assumption side by side.
Does this work for any stock?
It works best for established, profitable companies with a reasonably steady earnings history. It is not well suited to companies with negative EPS, early-stage or pre-revenue companies, or businesses whose earnings swing wildly year to year, since the formula assumes EPS and its growth rate are meaningful, stable inputs.

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