Infinity Pharmaceuticals is currently trading at $0.28 per share and has a Graham number of $1.19, which implies that it is -100% below its fair value. We calculate the Graham number as follows:

*√(22.5 * earnings per share * book value per share) = √(22.5 * -0.519 * -0.122) = 1.19*

The Graham number is one of seven factors that Graham enumerates in Chapter 14 of *The Intelligent Investor* for determining whether a stock offers a margin of safety. Rather than use the Graham number by itself, its best to consider it alongside the following fundamental metrics:

*Sales Revenue Should Be No Less Than $500 million*

For Infinity Pharmaceuticals, average sales revenue over the last 5 years has been $6,332,400, so in the context of the Graham analysis the stock has insufficient sales revenue. Originally the threshold was $100 million, but since the book was published in the 1970s it's necessary to adjust the figure for inflation.

*Current Assets Should Be at Least Twice Current Liabilities*

We calculate Infinity Pharmaceuticals's current ratio by dividing its total current assets of $82,268,000 by its total current liabilities of $13,300,000. 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 Infinity Pharmaceuticals’s case, current assets outweigh current liabilities by a factor of 6.19.

*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 Infinity Pharmaceuticals’s debt ratio is 0.71, the company has healthy debt levels. We calculate Infinity Pharmaceuticals’s debt to net current assets ratio by dividing its total long term of debt of $48,727,000 by its current assets minus total current liabilities.

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

Infinity Pharmaceuticals had negative retained earnings in 2018, 2019, and 2020 with an average of $-550,782,214. Retained earnings are the sum of the current and previous reporting periods' net asset amounts, minus all dividend payments.

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

Infinity Pharmaceuticals has no regular dividend.

*A Minimum Increase of at Least One-third in Earnings per Share (EPS) Over the Past 10 Years*

There are only 6 years of EPS data available on Infinity Pharmaceuticals, which is short of the required 10, but it's still worthwhile to consider its EPS trend over the available period. First, we will average out its EPS for 2012 and 2014 which were $-1.15 and $-0.83 respectively. This gives us an average of $-0.99 for the period of 2012 to 2014. Next, we compare this value with the average EPS reported in 2020 and 2021, which were $-0.68 and $-0.53, for an average of $-0.60. Now we see that Infinity Pharmaceuticals's EPS growth was 39.39% during this period, which satisfies Ben Graham's requirement for growth.

Based on the above analysis, we can conclude that Infinity Pharmaceuticals satisfies some of the criteria Benjamin Graham used for identifying for an undervalued stock because it is trading far below its fair value , as a healthy balance sheet, and strong earnings. On the other hand, its business may be too small, it offers no dividend, and it has a record of negative retained earnings.