Benjamin Graham, the godfather of value investing and Warren Buffett's mentor, has a secret formula on value investing.
The Graham Number:
Fair Value of a Stock = Square Root of (22.5) x (Earnings Per Share) x (Book Value Per Share)
The math of the Graham number is relatively straightforward. Graham believed that the price-to-earnings (P/EPS) ratio should be no more than 15. He also believed that the price-to-book value (P/BVPS) ratio should be no more than 1.5.
From that, Graham proposed that -- as a rule of thumb -- the product of the two should not be more than 22.5. In other words, (P/EPS of 15) x (P/BVPS of 1.5) = 22.5.
Read more on Graham Number here.
Subscribe to:
Post Comments (Atom)
-
Google url shortener service, goo.gl , is now much improved with newly included features like easier copy and paste, and ability to delete e...
-
If you have been reading the mainstream media or the social media, it is likely that you would have heard of SimplyGo - an initiative by the... -
The below is an LTA's official MRT map that includes both current and future train network all the way to year 2024. [2 Apr 2019]: U... -
Gartner Report on the Magic Quadrant for Analytics and Business Intelligence Platforms as of February 2021. -
ActiveSG is a national initiative from the Singapore government to encourage all to stay healthy and keeping fit. Membership registration i...
No comments:
Post a Comment
Do provide your constructive comment. I appreciate that.