The square root of (22.5 × EPS × Book Value per Share) — Graham's formula for the maximum price to pay for any stock.
Deeper Explanation
The Graham Number is derived from Graham's rules that a stock should not trade above 15x earnings OR 1.5x book value. The product of those two limits (15 × 1.5 = 22.5) produces a combined maximum P/E × P/B. The Graham Number is a ceiling, not a target — stocks should ideally be bought at a meaningful discount to it. It works best for asset-heavy businesses with stable earnings and is less applicable to asset-light compounders. Critics note it ignores growth, which Buffett acknowledged: hence his evolution from Graham's pure quantitative approach toward quality businesses at fair prices.
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