Financial
PEG Ratio & Benjamin Graham Number SQRT(22.5 * EPS * BVPS) stock valuation
Practice PEG and the Graham-number heuristic using consistent per-share inputs. Neither calculation establishes fair value or investment suitability.
Compare two screening heuristics with explicit input conventions
PEG divides a chosen P/E ratio by an EPS growth estimate expressed in whole percentage points. Here the assumed P/E is 18 and growth is 20%, giving 0.90. Record whether EPS is trailing or forecast and the growth horizon; different conventions give different ratios. A result below one does not by itself show that an investment is cheap.
The Graham-number heuristic sqrt(22.5*EPS*BVPS) corresponds to a product of P/E and price-to-book multiples of 22.5. This product condition is not the same as separately enforcing both P/E<=15 and P/B<=1.5, and it is not a universal maximum fair price. Use comparable currency and per-share bases; accounting book value and earnings quality affect interpretation.
| Valuation Metric (Price=$54, EPS=$3.00, Growth=20%, BVPS=$24) | Formula | Result |
|---|---|---|
| Trailing P/E Multiple | Price / EPS = $54 / $3.00 | 18.0x |
| Peter Lynch PEG Ratio | (Price / EPS) / GrowthPct = 18 / 20 | 0.90 (screening ratio) |
| Benjamin Graham Number ($) | SQRT(22.5 * 3.00 * 24.00) = SQRT(1620) | $40.25 |
| Loss-Making Guard (EPS = -$2.00) | IF((EPS<=0)+(BVPS<=0)>0, "N/A", ...) | "N/A" (Prevents false SQRT!) |
Calculate PEG Ratio (with decimal-vs-whole-percent normalization)
A2=SharePrice ($54), B2=EPS ($3), C2=GrowthRate (0.20 for 20%); multiplying C2 * 100 converts 0.20 into 20 percentage points.
This example requires positive price, EPS and growth. Forecast growth is uncertain; zero or negative EPS/growth makes this PEG convention unsuitable.
=IF(OR(COUNT(A2:C2)<>3,A2<=0),"Invalid inputs",IF((B2 <= 0) + (C2 <= 0) > 0, "N/A", ROUND((A2 / B2) / (C2 * 100), 2)))Benjamin Graham Number with negative-EPS / negative-BVPS safety guard
Rejects negative earnings or negative book value before calling SQRT(22.5 * EPS * BVPS).
=IF(OR(NOT(ISNUMBER(B2)),NOT(ISNUMBER(D2))),"Invalid inputs",IF((B2 <= 0) + (D2 <= 0) > 0, "N/A", ROUND(SQRT(22.5 * B2 * D2), 2)))Try the example
Use the original values or change them to test your understanding.