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tdp2664 InvestorPlace One helpful way to find potentially undervalued opportunities is from the "Godfather" of value investing himself, Benjamin Graham. Graham created an equation to calculate the maximum fair value for a stock, referred to as the "Graham Number." Any stock trading at a significant discount to this number would appear undervalued. For this list, we focus on S&P 500 companies. We used the Graham Number to screen for potentially undervalued stocks among a universe of highly profitable S&P 500 stocks that beat the industry average in all of the following ratios: Gross margin Operating margin Pretax margin The current market downturn has made these stocks even more undervalued on a Graham Number basis. Want a closer look at these terms and why they're valuable tools in trading and investing? Let's review: Market Capitalization (Market Cap) Market capitalization, commonly referred to as market cap, is the total market value of a company's outstanding shares. It can be thought of as a measure of company's size. It can be calculated by multiplying the number of shares by the current price of the shares. Graham Number According to Benjamin Graham, a former mentor of Warren Buffett and the so-called "Godfather" of value investing, the Graham Number is the maximum price that a value investor should pay for a given stock. A stock whose share price is below the Graham Number is considered to be undervalued, or of good value. It is a calculation for the fair-value price of a stock based on its earnings per share (EPS) and most recent quarter's book value per share (the value of the company's assets divided by the number of shares). Graham Number = Square Root of (22.5) x (TTM EPS) x (Most Recent Quarter (MRQ) Book Value per Share). We use
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