580:: This material is supplied for illustrative purposes only, and because of the inescapable necessity of security analysis to project the future growth rate for most companies studied. Let the reader not be mislead into thinking that such projections have any high degree of reliability, or, conversely, that future prices can be counted on to behave accordingly as the prophecies are realized, surpassed, or disappointed.
593:, acknowledges the footnote and argues that "I consider the footnote to be more of a reminder from Graham that the calculation of an intrinsic value is not an exact science and cannot be done with 100% certainty." Clark further explains that the formula "is to be used for estimating intrinsic value within a margin of safety which will accommodate the possibility of error in calculation."
602:: "We should have added caution somewhat as follows: The valuations of expected high-growth stocks are necessarily on the low side, if we were to assume these growth rates will actually be realized." He continued on to point out that if a stock were to be assumed to grow forever, its value would be infinite.
572:
However, a misconception arose that he was using this formula in his daily work due to a later reprinted edition's decision to move footnotes to the back of the book, where fewer readers searched for them. Readers who continued on in the chapter would have found Graham stating:
399:
584:
The movement of the footnote in the reprint has led to an assortment of advisers and investors recommending this formula (or revised versions of it) to the public at large — a practice that continues to this day.
271:
Graham later revised his formula based on the belief that the greatest contributing factor to stock values (and prices) over the past decade had been interest rates. In 1974, he restated it as follows:
569:, Graham was careful to include a footnote that this formula was not being recommended for use by investors — rather, it was to model the expected results of other growth formulas popular at the time.
152:
850:
62:: "My advice to analysts would be to limit your appraisals to enterprises of investment quality, excluding from that category such as do not meet specific criteria of financial strength".
428:
303:
181:
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476:
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232:
208:
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497:
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596:
Graham also cautioned that his calculations were not perfect, even in the time period for which it was published, noting in the 1973 edition of
55:, Graham devised the formula for lay investors to help them with valuing growth stocks, in vogue at the time of the formula's publication.
70:
In Graham's words: "Our study of the various methods has led us to suggest a foreshortened and quite simple formula for the evaluation of
675:
719:
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95:
74:, which is intended to produce figures fairly close to those resulting from the more refined mathematical calculations."
885:
771:
646:
735:
276:
598:
586:
85:
79:
51:
631:
260:
747:
Benjamin Graham, "The Decade 1965-1974: Its significance for
Financial Analysts," The Renaissance of Value
890:
796:
626:
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42:
31:
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211:
711:
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20:
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58:
Graham cautioned here that the formula was not appropriate for companies with a
49:- often referred to as the "father of value investing". Published in his book,
851:"How to Tell the Difference Between the Graham Formula and the Graham Number"
394:{\displaystyle V^{*}={\cfrac {\mathrm {EPS} \times (8.5+2g)\times 4.4}{Y}}}
430:= the value expected from the growth formulas over the next 7 to 10 years
235:
183:= the value expected from the growth formulas over the next 7 to 10 years
77:
The formula as described by Graham originally in the 1962 edition of
772:"Understanding The Benjamin Graham Formula Correctly | GrahamValue"
528:
of the bonds, though it has been asserted that he used 20 year
261:
Sustainable growth rate § From a financial perspective
823:"How to Value a Stock with the Benjamin Graham Formula"
758:"Benjamin Graham's Valuation Formula for Growth Stocks"
378:
331:
381:
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499:= reasonably expected 7 to 10 Year Growth Rate of EPS
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409:
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284:
275:
The Graham formula proposes to calculate a company’s
245:
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259:= reasonably expected 7 to 10 year growth rate (see
147:{\displaystyle V^{*}=\mathrm {EPS} \times (8.5+2g)}
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589:, the founder of the blog and investment service
670:. CreateSpace Independent Publishing Platform).
457:= the company’s last 12-month earnings per share
710:. First Collins Business Essentials. pp.
668:Benjamin Graham: The Father of Value Investing
41:It was proposed by investor and professor of
8:
827:The Value Investing Blog of Old School Value
16:Formula for the valuation of growth stocks
797:"Benjamin Graham Intrinsic Value Formula"
706:The Intelligent Investor: Revised Edition
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83:, and then again in the 1973 edition of
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7:
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524:in 1962 (Graham did not specify the
532:as his benchmark for this variable)
478:= P/E base for a no-growth company
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113:
14:
803:. Kennon & Green Press, LLC
795:Joshua Kennon (15 July 2011).
365:
350:
141:
126:
1:
647:FPI - Fundamental Power Index
857:. 2015-09-09. Archived from
238:base for a no-growth company
520:= the average yield of AAA
912:
736:"The Renaissance of Value"
18:
702:Graham, Benjamin (2006).
210:= trailing twelve months
60:"below-par" debt position
734:Benjamin Graham (1974).
599:The Intelligent Investor
567:The Intelligent Investor
557:on AAA corporate bonds.
86:The Intelligent Investor
52:The Intelligent Investor
19:Not to be confused with
632:Magic formula investing
28:Benjamin Graham formula
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423:{\displaystyle V^{*}}
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298:{\displaystyle V^{*}}
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176:{\displaystyle V^{*}}
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30:is a formula for the
627:Fundamental analysis
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886:Valuation (finance)
776:www.grahamvalue.com
666:Dave, John (2014).
513:{\displaystyle 4.4}
471:{\displaystyle 8.5}
450:{\displaystyle EPS}
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227:{\displaystyle 8.5}
203:{\displaystyle EPS}
66:Formula calculation
43:Columbia University
801:Joshua Kennon blog
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212:earnings per share
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546:{\displaystyle Y}
492:{\displaystyle g}
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252:{\displaystyle g}
89:, is as follows:
80:Security Analysis
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637:Value investing
617:Beneish M-score
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522:corporate bonds
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47:Benjamin Graham
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622:Ohlson O-score
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612:Altman Z-score
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587:Benjamin Clark
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861:on 2017-08-03
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555:current yield
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36:growth stocks
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21:Graham number
891:Stock market
863:. Retrieved
859:the original
855:ModernGraham
854:
831:. Retrieved
829:. 2017-01-30
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805:. Retrieved
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779:. Retrieved
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561:Application
896:Investment
880:Categories
865:2017-07-18
833:2017-07-20
781:2017-07-18
653:References
530:AAA bonds
416:∗
369:×
348:×
321:∗
291:∗
169:∗
124:×
105:∗
32:valuation
807:14 April
606:See also
526:duration
578:Warning
738:, pg 4
718:
674:
553:= the
809:2012
716:ISBN
672:ISBN
642:TMAI
305:as:
26:The
565:In
508:4.4
466:8.5
372:4.4
354:8.5
236:P/E
222:8.5
130:8.5
34:of
882::
853:.
842:^
825:.
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686:^
263:)
234:=
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868:.
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541:Y
487:g
445:S
442:P
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412:V
384:Y
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363:g
360:2
357:+
351:(
344:S
341:P
338:E
326:=
317:V
287:V
247:g
198:S
195:P
192:E
165:V
142:)
139:g
136:2
133:+
127:(
120:S
117:P
114:E
110:=
101:V
23:.
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