P/E Ratio & Graham Number Intrinsic Value Calculator
Financial Calculators
Calculate the P/E ratio, P/B ratio, earnings yield, Graham Number intrinsic value, PEG ratio, and margin of safety for any stock. Based on Benjamin Graham's value investing formulas.
P/E Ratio
Price ÷ EPS
Earnings Yield
1 / P/E × 100
P/B Ratio
Price ÷ Book Value
PEG Ratio
P/E ÷ Growth Rate
Graham Number
√(22.5 × EPS × BVPS)
Peter Lynch Fair Value
EPS × (Growth% )
Graham Margin of Safety
-61.3%
Stock may be overvalued vs Graham Number
How to use this tool
- Enter the current stock price, earnings per share (EPS), and book value per share.
- Optionally enter the expected EPS growth rate for PEG ratio and Peter Lynch fair value.
- The Graham Number, PE ratio, PB ratio, and margin of safety are calculated instantly.
What the P/E ratio means
The price-to-earnings ratio expresses how much investors are willing to pay per dollar of a company's earnings. A P/E of 20 means investors are paying $20 for every $1 of annual profit. A higher P/E implies investors expect higher future growth; a lower P/E may indicate a value opportunity or a business in decline.
A P/E ratio is most useful as a relative measure - compared to the same company's historical P/E, to competitors, or to a broad market index like the S&P 500 (which historically averages 15–25).
P/E variants you should know
| Variant | Earnings used | Best for |
|---|---|---|
| Trailing P/E (TTM) | Last 12 months of reported EPS | Current valuation based on real results |
| Forward P/E | Next 12 months of estimated EPS | Valuation if growth projections are correct |
| Shiller CAPE | 10-year average of inflation-adjusted EPS | Long-term market cycle analysis; smooths out recessions |
| PEG ratio | P/E divided by annual EPS growth rate | Adjusts for growth; PEG below 1 often considered undervalued |
P/E limitations and red flags
- Negative P/E: unprofitable companies have no meaningful P/E. Substitute the price-to-sales (P/S) or EV/EBITDA ratio for growth-stage companies.
- One-time items: a quarter with an asset sale or legal settlement distorts TTM earnings. Always look at adjusted or normalized EPS alongside GAAP EPS.
- Accounting manipulation: earnings can be managed through depreciation, amortization, and accrual choices. Free cash flow yield is a harder-to-manipulate alternative.
- Sector differences: utilities and consumer staples typically trade at lower P/Es (10–15) than high-growth technology companies (25–50+). Cross-sector comparisons are misleading.
Historical P/E context
The S&P 500 long-run average P/E is roughly 15–17. The Shiller CAPE (cyclically adjusted P/E) for the same index has ranged from below 5 (Great Depression trough) to above 44 (dot-com peak in 2000) and above 38 (2021). A CAPE above 25 has historically predicted below-average 10-year returns, though it has been above 25 for much of the period since 1995.
Frequently asked questions
What is the Graham Number?
The Graham Number is Benjamin Graham's formula for estimating the maximum fair value of a stock: √(22.5 × EPS × Book Value Per Share). Stocks trading below this number may be undervalued.
What is a good P/E ratio?
There is no universal "good" P/E. Graham suggested a maximum of 15× for value stocks. Growth stocks may command much higher P/Es. Compare within the same industry and consider future earnings growth.
What is the margin of safety?
The margin of safety is the percentage discount of the current price below the Graham Number. A positive margin means the stock trades below estimated intrinsic value.