It comes up with some strange figures.

I do it like Warren Buffett does it.

How many stocks have that kind of earnings predictability?

Dear Longbow
"I do it like Warren Buffett does it. "
The formula of Graham Intrinsic Value (see p. 295, Collins Edition Paperback, 2003) does not contain the addition of the quotient: ("yield on AAA Corporate Bonds of 1971 [4,4%]" / yield on AAA Corporate Bond actual). see above.
So as I understand you correctly Its Warren Buffet who "caluculates" the IV with the adapted formula of Graham:
Value = Current (Normal) Earnings x (8.5 + (2 x Expected Annual Growth Rate)+ ("yield on AAA Corporate Bonds of 1971 [4,4%]" / yield on AAA Corporate Bond actual)
Or am I completely wrong?
If yes, in witch book is the method of buffet IV Calculation published?
Thanks in advance for your reply and best wishes from Switzerland

Longbow! 8)

The Mary Buffett books explain in detail how Buffett uses John Burr Williams

discounted cash flow model to figure IV .


You just take 10 year average growth rate and 10 year average PE.

Take the current earnings and go out 10 years.

Take that number and apply the 10 year PE.

Then discount back to todays date.

Buffett wants a 15 % rate of return .

It gives the price you can pay and get a 15% plus return.

You would try to buy below that price.

Earnings must have a high degree of predictability.


Ben Graham,s formula gives some IV ,s that make no sense to me.

Also it is impossiable to predict future EPS on most stocks.

Just avoid the value traps.