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- V* = Intrinsic value per share
- EPS = Earnings per share
- g = Growth rate of the company
- Y = 10 Yrs government bond rate
Benjamin Graham, also known as the father of value investing, was known for picking cheap stocks. He has written two all-time best selling books- “The Intelligent Investor” and “Security Analysis”.
Coincidently, he was also the mentor of the legendary investor (and the third richest person in the world), Warren Buffett -who is supposed to inherit his value investing principles from Benjamin Graham.
The Graham Calculator is a good tool to find a rough estimate of the intrinsic value. It is simple and very easy to use. Although the values are not as pinpoint as the DCF valuation method, however, it is a good tool for shorthand analysis. Moreover, as it is said: “It is better to be approximately right, than precisely wrong”