Many investors turn to Benjamin Graham's so-called “Graham number” to calculate the fair price of a stock. The Graham number is the square root of (22.5 x earnings per share x book value per share), which for Lufax gives us a fair price of $27.63. In comparison, the stock’s market price is $1.99 per share. Lufax’s current market price is -92.8% below its Graham number, which implies that there is upside potential -- even for a conservative investors who require a significant margin of safety.

Many investor resources mention the Graham number in isolation, but in fact it is only one part of a check list for choosing defensive stocks that he laid out in Chapter 14 of *The Intelligent Investor*. The analysis also touches on the following points:

**Sales Revenue Should Be No Less Than $100 million.**

For Lufax, average sales revenue over the last few years has been $52,865,705,000.00, so according to the analysis the stock has impressive sales revenue.

**Current Assets Should Be at Least Twice Current Liabilities.**

We calculate Lufax's current ratio by dividing its total current assets of $339,063,998,000.00 by its total current liabilities of $19,784,830,000.00. Current assets refer to company assets that can be transferred into cash within one year, such as accounts receivable, inventory, and liquid financial instruments. Current liabilities, on the other hand, refer to those that will come due within one year. In Lufax’s case, current assets outweigh current liabilities by a factor of 17.1.

**The Company’s Long-term Debt Should Not Exceed its Net Current Assets**

This means that its ratio of debt to net current assets should be 1 or less. Since Lufax’s debt ratio is 0.1, the company has healthy debt levels. We calculate Lufax’s debt to net current assets ratio by dividing its total long term of debt of $44,002,018,000.00 by its current assets minus total current liabilities.

**The Stock Should Have a Positive Level of Retained Earnings Over Several Years.**

In Lufax’s case, the retained earnings have averaged $35,918,402,250.00 over the last 4 years. Retained earnings refer to the net income left for equity investors after all expenses have been accounted for, including dividends. It's a similar metric to free cash flow, with the difference being that earnings are calculated on an accrual, as opposed to a cash basis. In other words, earnings don't represent actual cash -- only evidence that the company can or will receive income based on its sales.

**There Should Be a Record of Uninterrupted Dividend Payments Over the Last 20 Years.**

A more in-depth review is necessary here, but we can tell you that Lufax has returned a 193.6% dividend yield over the last 12 months.

**The Company Should Have a Minimum Increase of at Least One-third in Eps Over the Past 10 Years.**

Here again, a more in-depth review of Lufax’s historical Eps and share price is needed. We will substitute a comparison of the company’s current Eps rate versus its projected one, which for Lufax gives us a projected short term Eps growth rate of -43.4%.

Based on the above analysis, we can conclude that Lufax meets most of Benjamin Graham's criteria for an undervalued stock because it is trading far below its fair value and has:

- impressive sales revenue
- an average current ratio
- healthy debt levels
- good record of retained earnings
- a decent dividend record
- decreasing earnings per share

Remember that the above analysis is intended to ensure that investors are not overpaying for a stock — but it does not guarantee the stock's price will move upwards!