Graham Formula stock screener
Stock screening results for the parameters you selected (or pre-selected parameters) are shown in the table below.
Backtesting
All our stock screeners are supplemented with backtesting on historical data, that also includes a scatter plot of past performance of stocks that meet you screening criteria. This is a very powerful combination. Not only you get the summary results (the mean and the median), but you also have a graphical representation of performance of each stock in each past year.
Please remember that past performance may not be indicative of future results. Please also note the significant distribution of the results and that the “median” stock underperforms the average by a very large margin. That means that the average is propped up by a relatively small number of stocks that perform spectacularly. Make sure you do not sell them prematurely.
About Graham Formula Stock Screener
Contrary to common belief, Benjamin Graham and David Dodd did not provide any indication that they used a formula or a specific algorithm for determining intrinsic value of a common stock. According to them, "security analysis does not seek to determine exactly what is the intrinsic value of a given security". It can only asses if the price is low or high enough. The intrinsic value is a range with vaguely defined limits, not a specific number.
In The Intelligent Investor, Benjamin Graham provides a simple formula, that, in his own words, only "approximates the results of the more elaborate calculations in vogue" (i.e. other methods) for the valuation of growth stocks. He never actually suggested or implied that that the formula gives the "true value" of a growth stock. This formula appeared in the text in the context of the discussion how unreliable predictions of future growth rates are.
The formula was slightly revised in 1974 to adjust for variations in market interest rates and was described as follows:
where V* is intrinsic value of a stock, EPS is the company’s last 12-month earnings per share, 8.5 is the constant representing the appropriate P/E ratio for a no-growth company as proposed by Graham, g is the company’s long-term (five years) earnings growth estimate, 4.4 is the average yield of high-grade corporate bonds in 1962, when this model was first introduced, and Y is the current yield on 20yr AAA corporate bonds.
Despite specific warnings from the author, the equation, known as the Benjamin Graham formula, is commonly used today for valuation of stocks.
Overzealous Graham followers even introduced the notion of relative Graham value (RGV), which is calculated as the ratio of stock's intrinsic value (V*) to its current price (P):
For overvalued stocks RGV is less than one, while for undervalued ones it is greater than one.