Fair Value Calculator

How to Use the Fair Stock Price Calculator

Our Fair Stock Price Calculator is a tool designed to help investors estimate the fair value of a stock using Benjamin Graham's formula. Follow the steps below to use the calculator:

• Price-to-Earnings Ideal (P/E): This is the current price of the stock divided by the earnings per share. Enter the P/E value in the appropriate field.
• Price-to-Book Ideal (P/B): This is the current price of the stock divided by the book value per share. Enter the P/B value in the corresponding field.
• Earnings Per Share: Provide the earnings per share of the company in question. This value is usually found in the company's financial reports.
• Book Value Per Share: Enter the book value per share of the company, which is also found in the financial reports.
• Calculation: After entering all necessary values, click on the calculate button to obtain the result.

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• Price-to-Earnings Ideal (P/E): 15
• Price-to-Book Ideal (P/B): 0.15
• Earnings Per Share: $10.00
• Book Value Per Share: $15.00

After performing the calculations, the calculator will provide the fair price of the stock. In the provided example, the fair price of the stock is estimated at $76.13.

Use this result as a reference when making investment decisions. Remember to consider other factors and conduct additional analysis before making any investment decisions.

What is Fair Stock Price?

The fair price of a stock is more than just the current market value; it is a careful evaluation of the intrinsic value of the company behind the stock. Unlike short-term fluctuations caused by the market, the fair price reflects the underlying financial fundamentals, such as earnings per share, book value per share, and future growth prospects. It is an essential tool for investors who want to make informed decisions and avoid paying more than a stock is really worth.

Who was Benjamin Graham?

Benjamin Graham was one of the most influential investors of the 20th century, whose ideas shaped the field of investment analysis. As a professor and prolific author, he developed the value investing approach, which emphasizes the importance of buying assets at a discount to their intrinsic value. Graham is best known for his book 'The Intelligent Investor,' where he introduces concepts such as margin of safety and the Graham Number formula. His contributions revolutionized how investors think about the stock market and continue to influence investors today.

How does the Graham Number formula work?

The Graham Number formula is a fundamental tool in evaluating the fair price of a stock. It combines two important valuation multiples - the P/E (Price-to-Earnings Ideal) and the P/B (Price-to-Book Ideal) - with the company's fundamentals, such as earnings per share and book value per share. By multiplying these factors, the formula produces a number that represents an estimate of the fair price of the stock, as defined by Benjamin Graham.

What is the Graham Number used for?

The Graham Number serves as a valuable reference for investors when assessing the value of a stock. It provides an objective way to evaluate whether a stock is overvalued, undervalued, or priced correctly relative to the company's fundamentals. By using the Graham Number as part of their analysis, investors can identify attractive investment opportunities and avoid market traps.

Why is it important to calculate the fair price of the stock?

Calculating the fair price of the stock is crucial for making informed and prudent investment decisions. By determining the intrinsic value of a company, investors can avoid overpaying for a stock and increase their chances of achieving solid long-term returns. Additionally, understanding the fair price of the stock allows investors to capitalize on market opportunities by purchasing stocks that are trading below their intrinsic value.

Conclusion

The fair price of the stock is an essential tool for investors who want to navigate the stock market with confidence and insight. Inspired by Benjamin Graham's ideas, the fair price represents a careful assessment of the financial fundamentals of a company.