Benjamin Graham: Intrinsic Value Calculator

By Stock Research Pro • May 27th, 2009

In his book The Intelligent Investor (published in 1949), Benjamin Graham introduced investors to a rule-of-thumb formula for valuing stocks. The formula seeks to establish a stock’s value based on earnings and growth expectations while incorporating currently available bond yields as an investment alternative investment. For value investors, bond yields present a significant pricing factor as higher available bond yields indicate that a stock must offer a relatively greater return to present a suitable investment.

About Benjamin Graham

Benjamin Graham (1894 – 1976), referred to by many as the “father of value investing” was an American economist, professor, and professional investor. As an investor, Graham earned a reputation for delivering solid returns while effectively managing risk. In 1928, Graham began teaching his approach to investing at Columbia University and went on to publish several books on investing, including Security Analysis (1934) and The Intelligent Investor (1949). Warren Buffet, the great value investor of today is among Graham’s many disciples.

Buying with a Margin of Safety

Value investors calculate a margin of safety in order to compare the intrinsic value of a stock against the current share price. If the intrinsic and market values are the same, the stock is considered to be fairly valued. If the price is greater than the intrinsic value, the stock is considered to be overvalued. Value investors look for those stocks that are undervalued; those stocks whose intrinsic value is greater than the market value. For the value investor, the greater the margin of safety, the better. Graham preferred stocks that offered a margin of safety or 40% or more.

Using the Stock Research Pro Software to Calculate Intrsinsic Value Using the Benjamin Graham Formula

Stock Research Pro is a desktop software application designed to guide and streamline the stock research, analysis, and valuation process. The software includes an automated calculator to arrive at a stock’s intrinsic value using the Benjamin Graham formula.


The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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