Fair Price & Ceiling Price Calculator (Graham & Bazin)
Objective fundamental valuation: Benjamin Graham intrinsic value for solid companies and Décio Bazin Ceiling Price for dividend-paying equities and REITs.
Valuation Fundamentals: Graham and Bazin Methods
Fair Price and Ceiling Price valuation unites two of the world most respected Value Investing frameworks: Benjamin Graham approach (focusing on earnings power and book value with a margin of safety) and Décio Bazin method (focusing on cash flow through reliable dividend yields).
1. Benjamin Graham Fair Price (Intrinsic Value)
Benjamin Graham, widely considered Warren Buffett mentor and the father of Value Investing, established an objective formula to verify if a stock price is supported by its earnings power and asset backing.
Where does 22.5 come from? Graham argued that a conservative investor should pay no more than 15 times earnings (P/E ≤ 15) and no more than 1.5 times book value (P/B ≤ 1.5). Multiplying these maximum bounds yields the constant: 15 × 1.5 = 22.5.
2. Décio Bazin Ceiling Price (Cash Dividend Method)
Décio Bazin, a respected Brazilian stock exchange veteran and author of "Faça Fortuna com Ações", formulated a strategy focused on selecting solid companies with consistent dividend distribution track records.
Comparison: Benjamin Graham vs. Décio Bazin
While both seek capital preservation and a margin of safety, their core models inspect complementary angles of fundamental analysis:
Graham Model (Balance Sheet & Earnings)
Evaluates how much the business earns per share and its tangible book value. Ideal for uncovering overlooked value bargains.
Bazin Model (Distributions & Cash Flow)
Evaluates how much cash is actually returned to shareholders. Ideal for dividend growth and passive income strategies.
Common Pitfalls to Avoid in Valuation
Perguntas Frequentes sobre Preço Justo e Preço Teto
What is the Fair Price of a stock?▼
Fair price is an estimation of a company intrinsic value founded on its economic performance (earnings, assets, dividends), helping investors identify under- or over-valuations.
What does Bazin Ceiling Price mean?▼
It is the maximum purchase price that, given the annual dividends per share entered, would yield the minimum desired Dividend Yield. The calculation does not guarantee future payout continuation.
How to calculate Graham Margin of Safety?▼
The margin of safety is calculated in two complementary ways: (1) Investor required margin to determine maximum buy price: PM = PF × (1 - MS), where PF is Graham's Fair Price and MS is desired margin of safety (e.g., 20% on $50.00 yields maximum buy price of $40.00); and (2) Real market margin relative to market price: MS_real = ((PF - P_current) / PF) × 100.
Does Graham formula work for Real Estate Investment Trusts (REITs)?▼
Classical Graham formula is not recommended for REITs because they distribute nearly all taxable net income and do not retain book value in the same manner as corporations. Bazin ceiling price and P/NAV are better suited.
What should be done when EPS or BVPS is negative or zero?▼
When a company posts net losses (negative EPS) or negative equity (uncovered liabilities), it is ineligible for Benjamin Graham's classical formula. Each metric must be strictly positive individually. Multiplying two negative values yields a positive arithmetic product, but that is economically invalid because Graham strictly required proven earnings power and tangible book value.
Bibliographic References & Methodology
- GRAHAM, Benjamin; DODD, David. Security Analysis: Principles and Technique. McGraw-Hill, 1934 (6th edition with preface by Warren Buffett and commentary by Seth Klarman, 2008).
- GRAHAM, Benjamin. The Intelligent Investor: The Definitive Book on Value Investing. Harper & Brothers, 1949 (Revised edition with commentary by Jason Zweig).
- BAZIN, Décio. Faça Fortuna com Ações Antes que Seja Tarde. Editora Cla, 1992 (Expanded edition).
Methodology: Classic Benjamin Graham formulas (Security Analysis / The Intelligent Investor) and Décio Bazin (Faça Fortuna com Ações) computed with decimal.js arbitrary precision. Strictly educational and analytical.
Educational and Regulatory Notice: The simulations, formulas, and Fair Price / Ceiling Price calculations provided on this platform are solely for educational and analytical purposes, based on theoretical mathematical models by Benjamin Graham and Décio Bazin. The displayed estimates and information do not constitute equity research reports, financial advice, investment recommendations, or an offer to buy or sell securities. Past returns and historical dividends do not guarantee future profitability or dividends. Investment decisions must consider individual investor profiles and comprehensive fundamental and technical analysis.