Checked reel · 22 Oct 2026
Benjamin Graham did print this formula in The Intelligent Investor, but he added an explicit footnote warning that it was only an illustration and did not give the true intrinsic value of a stock. He actually used it to show how unrealistic market growth expectations often were. Warren Buffett does not use this formula either. He famously cautioned against math shortcuts, saying "Beware of geeks bearing formulas". Plugging a high analyst growth rate like 19% into this formula doubles it to create a massive 47x P/E multiplier, which produces wildly inflated numbers for fast growing tech companies.
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