Many investors turn to Benjamin Graham's so-called “Graham number” to calculate the fair price of a stock. The Graham number is √(22.5 * earnings per share * book value per share), which for Meta Platforms gives us a fair price of $101.28. In comparison, the stock’s market price is $172.04 per share. Therefore, Meta Platforms’s market price exceeds the upper bound that a prudent investor would pay for its shares by 70%.

The Graham number is often used 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 requires us to look at the following fundamentals of Meta Platforms:

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

For Meta Platforms, average sales revenue over the last 5 years has been $89,227,200,000, so in the context of the Graham analysis the stock has impressive 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 Meta Platforms's current ratio by dividing its total current assets of $59,549,000,000 by its total current liabilities of $27,026,000,000. 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 Meta Platforms’s case, current assets outweigh current liabilities by a factor of 2.2.

*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 Meta Platforms’s debt ratio is 0.61, the company has healthy debt levels. We calculate Meta Platforms’s debt to net current assets ratio by dividing its total long term of debt of $19,923,000,000 by its current assets minus total current liabilities.

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

Meta Platforms had positive retained earnings from 2011 to 2022 with an average of $32,295,666,667. 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*

Meta Platforms has never offered a regular dividend.

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

To determine Meta Platforms's EPS growth over time, we will average out its EPS for 2010, 2011, and 2012, which were $0.28, $0.46, and $0.01 respectively. This gives us an average of $0.25 for the period of 2010 to 2012. Next, we compare this value with the average EPS reported in 2020, 2021, and 2022, which were $10.09, $13.77, and $8.59, for an average of $10.82. Now we see that Meta Platforms's EPS growth was 4228.0% during this period, which satisfies Ben Graham's requirement.

It may be trading far above its fair value and no dividend, but Meta Platforms actually meets most of Benjamin Graham's criteria for an undervalued stock because it has:

- impressive sales revenue
- an excellent current ratio
- healthy debt levels
- positive retained earnings from 2011 to 2022
- EPS growth in excess of Graham's requirements