FactorSage

Intrinsic Value · Lesson 1.5

Graham and Peter Lynch formulas

The Graham formula and the Peter Lynch fair value are deliberately simple. They are best used as cross-checks rather than primary valuations.

The Graham formula

Benjamin Graham proposed a simple formula linking earnings per share to expected growth. It is intentionally rough but useful as a sanity check on more elaborate models.

Graham Value ≈ EPS × (8.5 + 2g) × 4.4 / Y
Where g is expected growth and Y is the current AAA bond yield.

Peter Lynch fair value

Peter Lynch's heuristic uses the PEG idea: a stock trading at a P/E equal to its growth rate is roughly fairly valued. FactorSage exposes this as a single per-share number for direct comparison with price.

Using them in FactorSage

Both models are available as GRAHAM_VALUE / GRAHAM_VALUE_TTM and PETER_LYNCH_VALUE / PETER_LYNCH_VALUE_TTM. They are most useful inside a weighted combined intrinsic value where DCF and Owner Earnings carry most of the weight and these formulas act as guard rails.

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