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Stock fair price: Graham, Bazin, Gordon and Lynch

Estimate a stock’s fair price by five classic methods at once and compare it with the market price: the Graham number, the Graham growth formula, Bazin’s dividend ceiling price, the Gordon growth model and Peter Lynch’s fair value. See the range, the median and the buy price with a margin of safety.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Oct 31, 2026

Per-share data for the last 12 months. Example values for a fictional company.

The stock
Method settings

Long-term bond yield: use the current yield on high-grade long-term corporate or government bonds. Graham used the AAA corporate bond yield of his time, hence the 4.4 in the formula.

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—Fair price (median of the methods)
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Fair price by method

The lines show the current price and the buy price with the margin of safety applied to the median.

Tap the chart to see the values.

Methods

The summary lists your inputs, results, formulas, assumptions and sources. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and sources

Formulas

Graham number = √(22.5 × EPS × book value per share) (P/E up to 15 and P/B up to 1.5)
Graham growth formula = EPS × (8.5 + 2 × growth) × 4.4 ÷ long-term bond yield
Bazin = dividends per share ÷ minimum dividend yield
Gordon = dividends × (1 + growth) ÷ (required return − dividend growth)
Lynch = EPS × growth (P/E equal to growth, capped at 25)
Buy price = median of the applicable methods × (1 − margin of safety)

Assumptions and limits

  • Educational calculation tool, not a recommendation to buy or sell any security. Each method has its own assumptions: Bazin and Gordon suit regular dividend payers; Graham suits profitable, stable companies; none works well with negative or highly cyclical earnings.
  • Methods that do not apply (non-positive earnings, book value or dividends; dividend growth at or above the required return) are left out of the median.
  • Calculation tool using data you enter. It is not securities research or a recommendation; investment decisions are your own responsibility.

Official sources and references

  • Graham, B. The Intelligent Investor. HarperCollins (Graham number and growth formula).
  • Gordon, M. J. The Investment, Financing, and Valuation of the Corporation (1962).
  • Lynch, P. One Up on Wall Street. Simon & Schuster (P/E and growth).
  • Damodaran, A. Damodaran Online: valuation data and notes
  • U.S. SEC, Investor.gov

Frequently asked questions

What is a stock’s fair (ceiling) price?

The most it makes sense to pay for a stock, based on its earnings or dividends and the return you require. Buying below it leaves a margin of safety against estimation errors. This calculator shows five classic methods and their median.

Where do I find the inputs?

Earnings per share, book value per share and dividends per share for the last 12 months are in the company’s annual and quarterly reports, investor-relations site or any financial data site. For the long-term bond yield, use today’s yield on a high-grade long-term corporate or government bond.

How do I read the default example?

With a $38 share price, EPS of $3.60, book value of $22 and $1.60 of dividends, the methods range from $25.20 (Lynch) to $64.80 (Graham growth formula). The median is $40.00, 5% above the price, and the buy price with a 25% margin is $30.00. The price is below fair value in 3 of 5 methods.

What is the Graham number?

The square root of 22.5 × EPS × book value per share. The 22.5 comes from Graham’s limits of a P/E of 15 times a P/B of 1.5. It suits profitable, stable companies with positive equity.

How does the Bazin method work?

Divide the dividends per share of the last 12 months by the minimum dividend yield you require. With $1.60 of dividends and a 4% minimum yield, the ceiling price is $40.00. Above that price, the stock yields less than your minimum.

Which method is best?

None works for every company. Bazin and Gordon fit steady dividend payers; the Graham number fits stable, profitable companies; the growth formula and Lynch fit companies that reinvest and grow. When the methods disagree a lot, give more weight to those that match the business.

When should I not rely on these numbers?

When earnings are negative, very cyclical or inflated by one-off gains, and for companies that pay little in dividends. Fair prices are a starting point, not advice: before investing a meaningful amount, consider talking to a licensed financial professional.

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How to estimate a stock’s fair price

A fair or “ceiling” price is the most it makes sense to pay for a stock, given what it delivers in earnings or dividends and the return you require. Buying below it gives you a margin of safety, Benjamin Graham’s central idea: if your projections are wrong, the low price cushions the mistake. Each method starts from a different assumption, so the calculator shows several side by side.

The main methods

MethodFormulaBest for
Graham number√(22.5 × EPS × book value per share)profitable, stable companies
Graham growth formulaEPS × (8.5 + 2 × growth) × 4.4 ÷ long-term bond yieldcompanies with moderate growth
Bazindividends per share ÷ minimum dividend yieldsteady dividend payers
Gordonnext year’s dividend ÷ (required return − growth)growing, predictable dividends
Peter LynchEPS × growth (P/E equal to growth)growth companies

Example

A fictional company with earnings per share (EPS) of $3.60, book value per share of $22 and $1.60 of dividends over the last 12 months:

  • Graham number: √(22.5 × 3.60 × 22) = $42.21;
  • Bazin with a 4% minimum yield: 1.60 ÷ 0.04 = $40.00;
  • Gordon with a 9% required return and 3% dividend growth: 1.60 × 1.03 ÷ 0.06 = $27.47.

If the stock trades at $38, it is below the first two fair prices but above Gordon’s. The median of all methods that apply is a sensible single reference.

Watch out

  • Use recurring earnings and dividends: one-off gains, such as the sale of a business unit, inflate EPS and every fair price.
  • Cyclical companies (commodities, homebuilders) can look cheap at peak earnings. Prefer an average of several years.
  • Bazin and Gordon do not work for companies that pay little in dividends; Graham and Lynch do not work with negative earnings.
  • In the Gordon model, growth must be well below the required return, or the result explodes.

A fair price is a starting point for analysis, not a buy recommendation. Combine it with the quality of the business, its debt and the outlook for its industry.