Stock Fair Value Calculator

How the three models work

Every fair value estimate is wrong — the question is whether it's usefully wrong. This calculator runs three quick, independent models and blends them into a range, so no single assumption carries the whole verdict.

Model A — P/E multiple

Fair value = EPS × a P/E multiple that's normal for the industry. Fast and intuitive, but it ignores the balance sheet entirely and breaks when earnings are negative or depressed mid-cycle. Skipped when EPS is not positive.

Model B — Graham number

Fair value = √(22.5 × EPS × book value per share). Benjamin Graham's defensive ceiling: it refuses to pay more than 15× earnings and 1.5× book value simultaneously. Conservative and asset-aware — but it systematically undervalues asset-light businesses and is meaningless for banks and REITs, where book value doesn't capture the economics. Shown as N/A when EPS or book value isn't positive.

Model C — 5-year growth exit

Grow EPS for 5 years at your rate, apply the fair P/E at exit, then discount the result back at 10% per year: fair value = EPS × (1 + g)⁵ × P/E ÷ 1.1⁵. This is the only model that explicitly rewards growth — which also makes it the most sensitive to your optimism. Skipped when EPS is not positive.

Why blending beats trusting one

The base case is the median of the available models, and the low/high range shows how much the models disagree. When all three cluster together, your estimate is sturdier than any single formula. When they scatter — say the Graham number is half the growth-exit value — that gap tells you exactly which assumption (assets vs. growth) the valuation hinges on. For a deeper cash-flow-based cross-check, try the stock valuation calculator, or see what growth the current price already assumes with the reverse DCF calculator.

Worked example

Take a company with EPS of $4.20, expected to grow 8% a year, a fair industry P/E of 18, book value of $25 per share, and a market price of $55. Model A says $75.60, the Graham number says $48.61, and the growth-exit model says $68.97. The median — $68.97 — is the base case, so the stock trades at roughly a 20% margin of safety below fair value: interesting, and worth deeper research. Note the honest disagreement: the asset-based model thinks the growth model is 40% too optimistic. That spread is the real answer — the point estimate is just a summary.

Frequently asked questions

What is a stock's fair value?

Fair value is an estimate of what a share is worth based on the business's fundamentals — earnings, growth and assets — rather than its current market price. Because every model is an approximation, blending several simple models into a range is usually sturdier than trusting one precise-looking number.

Why blend three models instead of trusting one?

Each model fails differently. P/E multiples ignore balance sheets, the Graham number ignores growth, and growth-exit models depend heavily on your growth assumption. When three independent approaches land in the same zone, the estimate is more robust; when they diverge wildly, that itself is useful information about what drives the valuation.

When does the Graham number mislead?

The Graham number (square root of 22.5 × EPS × book value per share) was designed for asset-heavy industrial companies. It undervalues asset-light businesses like software and brands, and it breaks entirely for banks and REITs where book value has a specialized meaning. The calculator shows N/A when EPS or book value is not positive.

How much margin of safety should I demand?

A common bar is 20–30% below your fair value estimate before buying. The right buffer depends on how confident you are in the inputs: stable, predictable businesses can justify a smaller margin, while cyclical or fast-changing companies deserve a wider one. The margin of safety calculator explores this in more detail.