We know that it is hard to find a good price to buy a stock, because we do not know whether the current valuation is either undervalued or overvalued.

One of the formula Benjamin Graham introduced in his book “The Intelligent Investor” is able to calculate the value of a stock.

Value = EPS x (8.5 + 2 x CAGR)

EPS = the most recent annual EPS

CAGR = 7-10 years of compound growth

Let say Company A have an EPS of 50 cents, and 7-year CAGR of 15%:

EPS = RM0.50

Value = 0.5 x (8.5 + 2 x 0.15)

Value = 0.5 x (8.5 + 0.3)

Value = 0.5 x 8.8

Value = 4.4

With this formula, the value of Company A will be RM4.40. The reason he used 8.5 is because he mentioned that 8.5 shall be most reasonable PE ratio for every stocks. Besides, the fact that he used 7-10 years of CAGR rather than 3 or 5 is because he believed that once a company can achieve the constant growth for at least 7 years, they can also do the same for the next 7 years.

BUT!

One of the most famous investors in Malaysia, Fong Siling commented on this formula that it does not the company’s potential, management, and the company’s goodwill value.

The writer mentioned before that management is one of the most important element when selecting company, whether they did what they said years before, or is just merely to attract more investors and in the end, they did nothing?

However, the rest of the two things that Fong Siling mentioned are unable to be put in number. Potential is hard to be calculated as you can only guess or estimate the company’s potential, and is unable to confirm it unless you see it in the future. Goodwill on the other hand is even harder, imagine valuate the price of Coca Cola brand. It is almost impossible, hence he said that Graham’s formula is incomplete, especially for growth stock.

That being said, let’s try out the formula on some companies.

It seems to be working, what if we find other growth stocks?

As we can see, the formula does not quite work on growth stock. However, it does quite work on value investing, especially on stocks that have lower PE ratio.

In short, depends on which type of stocks you prefer, this formula will work differently. If it is a growth stock, maybe consider to adjust 8.5 factor to 15 or 20, then it may work. However, this formula can only be used as a reference, it does not necessary need to pass this formula before investing in a company.

我们都知道要找到一个股的买入点很难，因为我们不知道以它现在的估值，究竟是被低估还是被高估。

本杰明.格拉汉姆在他的书“聪明的投资者”中有提到一个算式，来计算出公司的价值。

EPS = 最新财政年的每股净利

CAGR = 7-10年的复利成长

假设A公司有50仙的每股净利，和15%的7年复利成长：

EPS = RM0.50

Value = 0.5 x (8.5 + 2 x 0.15)

Value = 0.5 x (8.5 + 0.3)

Value = 0.5 x 8.8

Value = 4.4

根据这个算式，A公司的价值将会是RM4.40。用8.5的原因在于格拉汉姆觉得8.5是每个公司最合理的本益比。此外，他选择用7到10年的复利成长而不是3或5年的原因是他相信一家公司如果连续7年都能够有这个成长速度，那么公司在未来7年也能够以这个速度继续成长。

但是!

其中一位马来西亚比较有名的投资者，冯时能(冷眼)有说到这个算式并没有包括公司的潜力，管理层的信赖程度，以及公司的商誉价值。

笔者曾经说过管理层是在选股的时候最重要的元素之一，我们要看管理层究竟也没有做到前几年曾经说过的东西，亦或者他们只是为了吸引投资者的目光而说，但到头来却什么都没做呢？

但是，剩下两个冷眼所说的东西就很难以数字来呈现了。潜力是很难计算的，你最多只能猜或者估计公司的潜力，而且直到公司未来的业绩出炉了，你才能知道你预计的准确度。商誉是更难计算的，想象一下你要将“可口可乐”这个品牌以价钱来显示。那几乎不可能，所以他才说格拉汉姆的算式还不完整，特别是对成长中的公司。

话不多说，我们来试看这个算式吧。

(参考以上RCECAP和MAGNI的例子)

好像可行啊，如果我们找些其他的成长股又会怎样呢？

(参考以上TOPGLOV和SCOMNET的例子)

我们可以看到，这个算式在成长股中不太有效果。但是，它的确在价值投资这方面是相对来说比较可行的，特别是低本益比的股。

总结，根据你买什么类型的股，这个算式会有不同的结论。如果是成长股的话，可以考虑将8.5提高到15或20，那可能就会比较准确。但是，这个算式只是一个参考，不一定要通过了才可以投资公司的。

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