Required the Formula of IV of Benjamin Graham

E

ehtsm

New Member
#1
#1
Hi Expert:

Does anyone can describe formula with easy example of Benjamin Graham that how to use this formula given below.

V* = EPS X (8.5+2g) x 4.4
---------- ------------------------
Y

In the above given formula the 2g is "The company’s long-term (five years) earnings growth estimate".

Now the question is that How to obtain five years earnings growth value of future to put the place of (2g)?

For Example if a Company MCB is trading in $300 and the EPS of 12 months is $2.50.

Kindly advise what is formula of obtaining five year earning growth value ?

Thanks

Ehtsm
 
masonicinvestor

masonicinvestor

Member
#2
#2
ehtsm said:
Hi Expert:

Does anyone can describe formula with easy example of Benjamin Graham that how to use this formula given below.

V* = EPS X (8.5+2g) x 4.4
---------- ------------------------
Y

In the above given formula the 2g is "The company’s long-term (five years) earnings growth estimate".

Now the question is that How to obtain five years earnings growth value of future to put the place of (2g)?

For Example if a Company MCB is trading in $300 and the EPS of 12 months is $2.50.

Kindly advise what is formula of obtaining five year earning growth value ?

Thanks

Ehtsm
Click to expand...
Thats the formula for Value not implied volatility i.e. IV. You might have to tweak it to suit emerging market conditions too.
 
masonicinvestor

masonicinvestor

Member
#5
#5
ehtsm said:
Thanks

But can you explain the formula that how one can obtain future growth rate like coming 5 years.
Click to expand...
That DEPENDS.
You tell me.
If a car has been traveling north since past 100km, is it logical to assume it will travel in the same direction for 5 more kilometer?

Or car that has been traveling in all directions without aim.
 
E

ehtsm

New Member
#6
#6
masonicinvestor said:
That DEPENDS.
You tell me.
If a car has been traveling north since past 100km, is it logical to assume it will travel in the same direction for 5 more kilometer?

Or car that has been traveling in all directions without aim.
Click to expand...
Do you think that the Benjamin Graham's formula is useless? He was a father of intrinsic value as admit Warrent Buffet.
 
S

Steve_1982

Active Member
#8
#8
On its own, the formula isn't of much use. Find a way to recognize a company with strong fundamentals and then buy that company when it is available at a significant discount to its intrinsic value. I (looking at historic data) noticed in 2001 and 2009 that there were many companies available with strong fundamentals and had a price at a significant discount to intrinsic value.

I guess that it's a good time to buy not when only one company is available at a bargain, it's a good time to buy when there are dozens of companies available at a bargain.
 
masonicinvestor

masonicinvestor

Member
#9
#9
I never said it was useless, but its reliability is there in specific scenario. I personally use it as off the hand calculation to judge cos for further investigation. Besides that, every student of graham knows that this formula was for intrinsic value of bonds, not common stock as against what most people think.
 
E

ehtsm

New Member
#10
#10
Thanks of All!

But does anyone know the formula of future earnings per share or future growth rate.

I want to know this just for knowledge, I know that future prediction may be wrong and we are not 100% sure but Garaham was not a common teacher/investor of stock, bond, finance. He was the teacher of Warrent Buffet who once said: “I'm 15% Fisher and 85% Benjamin Garaham. W.B. always recommend to new comer to read B.G. books where such formula exist.
 
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