Definition
Graham Number
A rough fair-value estimate for asset-heavy, defensive businesses.
The Graham Number is a formula from Benjamin Graham that estimates the maximum price a defensive investor should pay — a ceiling, not a floor: the square root of 22.5 × earnings per share × book value per share. It can’t be calculated when either figure is zero or negative. It was designed for stable, asset-heavy, defensive businesses, so Market Lens deliberately excludes it for the Technology, Communication Services, Healthcare, and Consumer Cyclical sectors, where it tends to badly understate value. Treat it as one conservative yardstick among several, not a standalone verdict.
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