Formula to Calculate Graham Intrinsic Value

Benjamin Graham is the founder of the stock investing strategy of value investing. This strategy is based on a calculation of the intrinsic value of the business. The Benjamin Graham Formula for finding the intrinsic value of a stock was:

V^* = EPS × (8.5 + 2g) × 4.4Y

Where,

V^* - Intrinsic value per share or the value expected from the growth formulas over the next 7 to 10 years.

EPS - the companys last 12-month(four quarters) earnings per share.

8.5 - P/E base for a no-growth company.

g - reasonably expected 7 to 10 year growth rate.

4.4 - the average yield of AAA corporate bonds in 1962.

Y - the current yield on AAA corporate bonds.