What is the Graham Number?
The Graham Number is a value investing estimate based on earnings per share and book value per share. It is often used as a conservative reference point for identifying stocks that may trade below fundamental value.
Should investors buy a stock just because it trades below its Graham Number?
No. The Graham Number is only one valuation tool. Investors should also review profitability, debt, cash flow, business stability, and whether book value accurately reflects the company's economics.
How does the Graham Number Stocks screen work?
We start with Canadian-listed stocks and apply a Graham Number-style value screen. First, we use basic liquidity filters to exclude very small and illiquid stocks. From there, we focus on companies with positive earnings, a reasonable financial profile, and a share price below the Graham Number, which helps identify stocks trading at a discount to a traditional fair value estimate based on earnings and book value.
What should investors look for when using the Graham Number Stocks screen?
Investors using the Graham Number usually look beyond price alone. A stock trading below its Graham Number can become more interesting when it also has positive earnings, a solid balance sheet, and enough liquidity to make it investable. The combination of valuation support and basic quality filters helps improve the usefulness of the screen.