Over the summer, I revised the formatting of the presentation of individual company valuations on ModernGraham. As part of that process, I began utilizing 20 years of financial data within the valuations, which allowed me to calculate historical estimates of intrinsic value using the ModernGraham valuation formula. Each valuation thus included a chart showing the price in relation to the MG Value over a period of time. Since then, I’ve been studying those charts in order to determine the effectiveness of the valuation formula. This post will review some of my findings, and introduce a key new metric for ModernGraham advanced premium members to utilize in analyzing investment opportunities.
Often I get questions about the Graham Formula versus the Graham Number. There seems to be some misunderstanding out there between the two concepts, and this article will aim to help you as a reader understand the difference between the Graham Formula and the Graham Number. Both figures can be useful in their own ways, and can be combined in the ModernGraham approach.