Hello Serenity,

Looking at the CRR SEC filings, it says in their latest annual report income statement that the EPS is 2.41 (

At the current price of 44.65 wouldn't that make their P/E ratio around (44.65 / 2.41) = 18.50? Why would this constitute as a defensive stock if it is above the 15 P/E ratio rule? If I missed something, sorry in advance.


Dear Gambit,

Thank you for your forum post!

Graham recommended the following for Defensive investors:

6. Current price should not be more than 15 times average earnings of the past three years.
7. Current price should not be more than 1-1⁄2 times the book value.
As a rule of thumb, we suggest that the product of the multiplier times the ratio of price to book value should not exceed 22.5.

Graham's recommended price for Defensive quality stocks is calculated by combining #6 and #7, and is popularly known as the Graham Number.

For more details, please see the Quick Reference section on Intrinsic Value calculations.

Graham Resources