Jurnal Ekonomi Syariah Teori dan Terapan p-ISSN: 2407-1935, e-ISSN: 2502-1508. Vol. 10 No.

1
Januari 2023: 16-26; DOI: 10.20473/vol10iss20231pp16-26

Analysis of Sharia Banking Share Valuation Using Intrinsic Value and Margin of
Safety Method Graham Number

Analisis Valuasi Saham Perbankan Syariah dengan Metode Intrinsik Value dan
Margin of Safety Graham Number

Fajriyatul Abadiyah , Hikmah Endraswati

Magister Ekonomi Syariah, Faculty of Islamic Economics and Business, UIN Sunan Kalijaga,
Yogyakarta, Indonesia
fajriyatulabadiyah@gmail.com*, 197705072000032001@uinsuka.ac.id

ABSTRACT Article History

This study aims to analyze the valuation of Islamic banking stocks using Submitted: 10-01-2023
the intrinsic value method and the margin of safety Graham number and Reviewed: 19-01-2023
determine whether Islamic banking stocks are undervalued or overvalued. This Accepted: 30-01-2023
research is included in the descriptive quantitative research. The data source Published: 31-01-2023
used is secondary data obtained from www.idx.co.id and *
Correspondence:
www.Indopremier.com, while the research sample selection technique uses a Fajriyatul Abadiyah
purposive sampling method with the criteria of companies that have been IPOs
Open access under Creative
for more than five years and the number of samples found consists of three Commons Attribution-Non
Islamic banking stocks, namely BRIS, BTPS, and PNBS shares. Based on the Commercial-Share A like 4.0
International Licence
results of the valuation of Islamic bank stocks using the intrinsic value method (CC-BY-NC-SA)
and margin of safety, graham numbers are obtained if the three Islamic bank
stocks experience an overvalued/expensive condition above the criteria set by
Benjamin Graham, the cause is because investor euphoria is quite high
regarding the news of the merger of Bank Syariah Indonesia so that it can be
concluded that the three Islamic banking stocks have considerable investment
risks. Therefore, investors need to wait and see until the position of the Islamic
bank's stock price is close to its fair price.
Keywords: Graham Number, Intrinsic Value, Margin of Safety, Market
Share, Islamic Banking.

ABSTRAK
Penelitian ini bertujuan untuk menganalisis valuasi saham perbankan
syariah dengan metode intrinsik value dan margin of safety graham number,
serta menentukan apakah saham perbankan syariah dalam kondisi undervalue
atau overvalue. Penelitian ini termasuk kedalam penelitian kuantitatif
deskriptif. Sumber data yang digunakan adalah data sekunder yang diperoleh
dari www.idx.co.id dan www.indopremier.com, sedangkan teknik pemilihan
sampel penelitian menggunakan metode purposive sampling dengan kriteria
perusahaan yang telah IPO lebih dari lima tahun dan diperoleh jumlah sampel
yang ditemukan terdiri dari tiga saham perbankan syariah, yakni saham BRIS,
BTPS, dan PNBS. Berdasarkan hasil valuasi saham bank syariah dengan
menggunakan metode intrinsik value dan margin of safety graham number
diperoleh jika ketiga saham bank syariah tersebut mengalami kondisi
overvalue/mahal berada diatas kriteria yang ditetapkan oleh Benjamin
Graham, penyebabnya dikarenakan euforia investor cukup tinggi mengenai
kabar merger Bank Syariah Indonesia sehingga dapat disimpulkan ketiga
saham perbankan syariah memiliki risiko investasi yang cukup besar. Maka
dari itu, investor perlu wait and see sampai posisi harga saham bank syariah
mendekati harga wajarnya.
Kata Kunci: Graham Number, Intrinsic Value, Margin of Safety, Market
Share, Perbankan Syariah.

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I. INTRODUCTION
Indonesia has long been known as a country with the largest Muslim population in the Asian region
and even in the world, this should be a great potential opportunity for the development of the Islamic
economy in that country. However, until now the development of the Islamic economy is still stagnant
and is still below that of Malaysia's allied country. According to CNBC Indonesia data, in 2022
Indonesia can only project the development of its sharia market share to reach 2.6% even though it has
received support from the merger of three state-owned sharia banks on February 1, 2021. The presence
of PT Bank Syariah Indonesia Tbk can be a great representation of the rules and commitment of the
Government of Indonesia in increasing the share of the sharia market in Indonesia, starting from sharia
financial institutions as the main actor in developing sharia market share which is supervised by the
government.
Not as a competitor, the merger of Indonesian Islamic banks also has a positive impact on other
Islamic banks. In addition to improving the company's financial performance (Puspaningtyas & Intan,
2021), it also increases the share price of Islamic banks on the capital market. This is because investors
have high hopes, therefore they begin to decide to invest in Islamic banking stocks. Sourced from the
trading view that during the merger process, there was a movement in the price of Islamic bank shares,
the cumulative percentage of BRIS shares increased very significantly to reach 688.27%. Furthermore,
the share prices of BTPS and PNBS also upwards by 36.00% and 58.90%, respectively. The high share
price is reflected in the trading volume activity of the three Islamic banking shares, especially since the
Conditional Merger Agreement (CMA) was first announced in October 2021.

Source: Tradingview.com, 2022.

Figure 1. Stock Comparison BRIS, BTPS, PNBS following merger Bank Syariah Indonesia.
Investment is not only about investing in a company solely with the hope of getting a return on
profits in the future. Because the real goal of investing is how to maximize profits by minimizing losses
(Budiman, 2020). One type of investment that is in great demand by various groups, including the
millennial generation, is investing in stocks in the capital market. According to CNBC data, throughout
2021 it was recorded that the number of new investors reached 7.48 million, where millennial investors
dominated as much as 80 percent (Sidik, 2021). The potential for high yields is a special attraction,
although it is not uncommon to find cases of investors experiencing large losses in stock investments,
in general, these mistakes are caused by the investors themselves making the wrong investment
decisions. Those who are generally young and have minimal knowledge and experience in investing in
the world of investment often suggest that they can get rich quickly and instantly in the capital market,
but they forget the key that the stability of the real profits obtained in stock investment is for the long
term, not short-term speculators.
Figures such as Benjamin Graham, Warren Buffet, Peter Lynch, Phil Town, to Lo Kheng Hong
are often used as examples of people who are successful in investing in stocks. Although they have their
strategies written in their books, the strategy they do is to sort and choose companies with good
fundamentals (Wirawan & Sumirat, 2021). This strategy is often referred to as the stock valuation
method or value investment (intrinsic value) which was first introduced by Benjamin Graham in his
book The Intelligent Investor and Security Analysis (Graham & Dood, 2014). In investment science,
value investing strategy is an analytical method to find cheap stocks, namely choosing stocks at prices

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that are far below the intrinsic value of the company or other terms discounted stocks (Budiman, 2020),
by screening company stocks which are later expected to provide returns according to what is expected,
especially in the stock market whose movements are unpredictable (Kusmayadi et al., 2020). The main
advantage of the Graham method is the focus on the fundamental analysis of the company and the
intrinsic value of stocks. This method focuses on financial ratios such as the ratio of stock price to profit
(PER), stock price to book value (PBV), and dividend ratio. In addition, Graham's method also
emphasizes the importance of portfolio diversification and avoiding stocks that are considered too risky
(MOS).
In theory, the stock market price is determined by the supply and demand in the stock market. The
price offered by buyers and the price offered by sellers will move toward the equilibrium market price.
The market price of a stock can also be affected by other factors such as a company's financial
performance, industry prospects, and interest rates. MOS (Margin of Safety) is a ratio used to measure
how expensive or cheap a stock is compared to earnings per share (EPS) and book value per share
(BVPS). A high MOS indicates that stock prices tend to be expensive compared to earnings per share,
while a low MOS indicates that stock prices tend to be cheap compared to earnings per share. The
undervalued condition of the stock price occurs when the stock price in the market is lower than the
actual intrinsic value of the company. This can occur due to various factors, such as lack of information
or market ignorance about the company, and conversely, an overvalued condition of the stock price
occurs when the stock price in the market is higher than the actual intrinsic value of the company. This
is due to market euphoria or speculative conditions. In general, stock market prices, margin of safety,
and undervalued and overvalued conditions are interrelated and influence one another. Therefore,
fundamental and technical analysis is needed in evaluating companies and market conditions so that
they are not mistaken in choosing between cheap stock and gimcrack stocks.
In the world of capital markets, there are the terms cheap stocks and gimcrack stocks. Cheap stocks
are a term used for stocks that are considered undervalued or stocks whose prices have been discounted
(down/correction) and have the potential to rebound, while gimcrack stocks are stocks that are
considered overvalued or stocks whose volume and bid-offers are illiquid and movements are
inconsistent (Budiman, 2020). Important for investors to know whether a stock is cheap or expensive
and whether it is worth investing in. Benjamin Graham recommends using the value investing method
and the margin of safety Graham number to be able to assess the fair price of a company's shares and
estimate future business prospects (Srivastava & Kulshrestha, 2020). According to Graham, a value
investor must be able to find the right company at the right price, namely by analyzing the company as
a whole (screening) and combining the company's financial performance as well as the stock market
performance so that investors know the fair value of shares and to minimize losses. The value investing
method is perfect for investors who have a high level of patience because the key to getting the
maximum profit in the capital market will be obtained when the shares are held and sold several years
later. While the margin of safety is used to determine the security risk limit that investors will face, if
the MOS is negative then the stock has a greater risk, and if the MOS is positive then the stock has a
smaller risk (Lin & Sung, 2014).
The Graham formula or Graham number is the upper limit of the price range that a defensive
investor should pay for the stock. According to theory, any stock price below the limit set by the Graham
number is considered undervalued and therefore it is appropriate to buy/invest in that stock. The Graham
number method is often used as a general test when trying to identify stocks that are currently selling
at good prices. The figure of 22.5 is included in the calculation to take into account Graham's belief that
the price-to-earnings ratio or PER cannot exceed 15x and the PBV cannot exceed 1.5x. This means that
if the stock value is above the set limit then the stock is overvalued or expensive, and vice versa if the
stock value is below the set limit then the stock is undervalued or cheap (Sitorus & Hutasoid, 2017).
There are several previous studies related to evaluating the value/fair price of shares and
calculating the intrinsic value of companies using various methods. Such as the research conducted by
Sitorus and Hutasoid (2017), regarding the effect of EPS and stock returns on the IHSG by using
Benjamin Graham's value investing in 20 companies that meet Graham's criteria. The results through
the Pooled Lead Square test method found that changes in the EPS value did not significantly affect
changes in the IHSG, but changes in the value of stock returns significantly affected changes in the
IHSG, while the IHSG variable was simultaneously influenced by two variables, namely EPS and stock

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returns (Sitorus & Hutasoid, 2017). Research by Yulita and Rahayu (2019) found that the performance
of the hotel and tourism industry in Indonesia based on Benjamin Graham's perspective, the results are
ratios of EPS, PER, PBV, ROE, CR, and DER simultaneously influencing stock prices, and partially
EPS, PER, PBV and DER which affect stock prices (Yulita & Rahayu, 2019).
Research by Ervian (2015) showed that utilizing Benjamin Graham's value investing method can
be used to achieve capital gains. As a result, 5 stocks meet Benjamin Graham's undervalued stock
criteria, namely MFIN, CFIN, PJAA, ANTM, and FAST stocks. While the comparison of the average
return on stocks that fall under the criteria of undervalued stocks from Benjamin Graham with the
average return on stock portfolios selected randomly shows that the returns from stocks included in the
criteria for undervalued stocks from Benjamin Graham have a higher average return than the average
return on stock portfolios selected randomly. Thus, Benjamin Graham's value investing method can
provide capital gains for investors who wish to invest their capital in the long term (five years) compared
to random capital gains from portfolios (Ervian, 2015).
Meanwhile, Rakim et al (2022) analyzed investment strategies using Benjamin Graham's approach
as alternative consideration in making investment decisions. Because applying the Graham Number
combination has been proven to produce an excess return that exceeds the Index (Rachmattulah &
Faturohman, 2016). Apart from using the graham number method, other studies have found that
analyzing value investing can also use the Phil Town method as Hutabarat did on eight stocks owned
by Anthony Salim (Hutabarat, n.d.). Wirawan and Sumirat (2021) even compared the performance of
the IHSG portfolio using the strategies of Warren Buffet, Benjamin Graham, and Peter Lynch. The
result is that the three types of portfolios have a beta almost equal to 1, which means they have a lower
risk compared to market risk (Wirawan & Sumirat, 2021).
Doing a stock valuation analysis is very important before deciding to buy a stock, the calculations
in determining it vary widely with various methods (Alhazami, 2020). Especially for the defensive type
of investor, value investing is the essence and way of finding lower than the value of its assets (Petrova,
2015). This is in line with research from Antoni et al (2020) that by assessing the fair price of shares,
investors can choose stocks that fall into the overvalued or undervalued category before deciding on an
investment (Antoni et al., 2020). In general, intrinsic value is the basis of value investing developed by
Benjamin Graham, who suggested that investors should focus on the intrinsic value of stocks and buy
stocks priced below that value with a sizable margin of safety. However, Lin and Sung (2014)
considered that Graham's formula can be used actively to outperform the market with sufficient safety
margins, but there are still doubts about using this method as investors because of how simple this
method is, so it needs to be combined with further analysis, this formula can provide a sizable return
for individual investors so that they can invest comfortably and safely.
From some of the literature, it was found that the intrinsic value and margin of safety Graham
number methods are still rarely used by Indonesian investors in choosing stocks that are undervalued
or overvalued, especially Islamic stocks. So, this study aims to assist investors in evaluating stocks in
the Islamic banking sector using the intrinsic value method and the margin of safety Graham number.
Where the object of research was carried out on shares of Islamic banking companies listed on the
Indonesia Stock Exchange, namely PT Bank Syariah Indonesia (BRIS), PT Bank BTPN Syariah
(BTPS), and PT Bank Panin Dubai Syariah (PNBS).

II. LITERATURE REVIEW

Graham Number Intrinsic Value Method
According to the book by Benjamin Graham and David Dodd entitled The Intelligent Investor and
Security Analysis, the key to successful and safe investment is to apply the right strategy in finding
stocks that are in "wrongly priced" conditions, namely using the concepts of value investing and margin
of safety (Graham & Dood, 2014). Value investing is used to analyze a company by looking at several
aspects, namely business, management, financial, and company value to see long-term prospects
(Hutabarat, n.d.). Benjamin Graham feels that the simplicity of the model allows investors to identify
companies easily, quickly, and accurately with expensive/overvalued or undervalued stock valuations.
The Graham number is a way of determining the highest price (ceiling) investors must pay for a
particular stock. This calculation was developed by Benjamin Graham for defensive or cautious investor

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types. Defensive investors usually prefer to invest in conservative stocks that are stable and not easily
affected by current economic conditions, the goal is to have stocks that have minimal management and
can be relied upon to provide consistent returns. Defensive investors prefer to wait for the right moment
to invest so they are free from risk (Widyawinata, 2022).
The Graham number method can help investors know which stocks have good fundamentals and
are cheaply priced by the capital market, this is because this calculation is only based on the value of
earnings per share (EPS), price earnings ratio (PER), book value per share (BVPS), and the company's
price book value (PBV) which is assumed to have the same performance on an annual basis (Lin &
Sung, 2014). The criteria for the Graham Screen approach in choosing a stock, namely the EPS value
must be positive for the last five years, the PER ratio cannot be more than 15 times because if the PER
is high it indicates that the stock is a speculator stock, the desired PBV ratio is 1.5 which when
multiplied by with a PER of not more than 22.5 (Sitorus & Hutasoid, 2017).
Meanwhile, according to Kurniawan, there are at least three central elements in value investing; 1)
oriented towards a bottom-up strategy which involves identifying certain undervalued investment
opportunities. 2) oriented towards absolute performance, not relative performance. 3) an approach that
aims to avoid risk (Kurniawan, 2020). Halim put forward several specific criteria on how to make
investment decisions at the fair price of a share/intrinsic value, which can be done as follows (Halim,
2005).
Table 1. Criteria for Making Investment Decisions
Information Share Price Conditions Investment decision
If intrinsic value > market price The stock price is too cheap Buy, because there is a possibility
(undervalued) the price will go up (buy)
If intrinsic value < market price The stock price is too Sell, because there is a possibility
expensive (overvalued) the price will fall (sell)
If intrinsic value = market price Fair or normal share price (fair Hold, do not sell or buy until there
valued) is a time when the estimated
earnings for investors (hold/wait &
see)
Source: (Halim, 2005)
Intrinsic value is the true value of a stock or asset that is calculated using fundamental analysis.
Benjamin Graham developed the concept of intrinsic value and suggested that investors should buy
stocks that are valued below their intrinsic value (Graham & Dood, 2014). However, Graham also
suggested that investors should not only rely on one ratio but should combine several other ratios to get
a more comprehensive picture of intrinsic value. Graham also recommended that investors should buy
stocks that are valued below their intrinsic value with a large enough margin of safety which can help
reduce the risk of investment failure (Kaniati et al., 2020).
A company is said to have good performance (undervalued) if it meets the intrinsic value criteria
of the Graham number or better known as the Graham Screener, namely;
1. Price book value (PBV) maximum 1.5 times
2. Price earnings ratio (PER) maximum 15 times
3. Earnings per share (EPS) must be positive and grow more than 30% for the last 5 years
4. Debt to equity ratio (DER) is less than 2, except for financial sector shares which can be less than
230%
5. Current ratio is greater than 2
6. Always profitable in the last 5 to 10 years
7. Always consistently distribute dividends in a row in the last 5 to 10 years
Several studies say that the criteria set for Benjamin Graham's value investing method, also known
as the Graham screening, are using ten criteria (Ervian, 2015), (Rachmattulah & Faturohman, 2016),
(Rakim et al., 2022), or nine criteria (Sitorus & Hutasoid, 2017), (Srivastava & Kulshrestha, 2020), as
well as seven criteria (Wirawan & Sumirat, 2021). Nonetheless, in general, the intrinsic value graham
number method focuses on earnings ratios such as EPS, PER, BVPS, and PBV. While the margin of
safety (MOS) is used to assess the amount of risk that investors will get on undervalued or overvalued
stocks.

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Margin of Safety (MOS)

The Margin of Safety, or safety margin, is the percentage resulting from the difference between
the market price of the stock and the company's intrinsic value (Islami, 2020). Benjamin Graham
emphasized the importance of MOS in value investing because MOS serves as a safety device for
investors so that investors do not rely too much on accurate estimates in the future. If the margin is
large, it is sufficient to assume that future profits will not fall too deep below past earnings so that
investors feel quite protected from the market sentiment which often occurs out of control. MOS is
often called discount stocks, namely buying stocks that have a lower market value than their intrinsic
value, meaning that companies that have small PER and PBV are called undervalued/cheap stocks, or
conversely buying stocks that have a higher market value than their intrinsic value, meaning companies
those with high PER and PBV are called overvalued/expensive stocks (Budiman, 2020).
OVERVALUED
(EXPENSIVE)
HIGH
QUALITY,
PROSPECTS
PER & PBV
UNDERVALUED
(CHEAP)
LOW
RISK, NO
PROSPECTS
Source: (Kurniawan, 2020)
Figure 2. Cheap/Expensive Company Stock Criteria
According to research by Kusmayadi et al, the margin of safety can show the value of the
opportunity to gain from purchasing shares by comparing the current stock price with the fair price of
shares or fair value (Kusmayadi et al., 2020). Meanwhile, the results of Islamic research state that the
greater the MOS value of a stock, the smaller the risks it faces, and vice versa (Islami, 2020). And it
can be concluded, the margin of safety can be used in predicting the prospects for a company's stock by
comparing market performance with company performance as a safe limit in stock portfolio
management.
Evaluation of stocks using intrinsic value and margin of safety (MOS) developed by Benjamin
Graham can provide several benefits for investors and the development of the Indonesian capital
market:
1. Helping investors in determining the fair price of shares: Intrinsic value and MOS can be used as
tools to determine the fair price of a share. Investors can use these two concepts to determine whether
a stock is valued at a fair price or not.
2. Lowering the risk of investment failure: Using MOS in stock evaluation can assist investors in
reducing the risk of investment failure. When buying stocks with a large MOS, investors will have
better guarantees if there is a mistake in assessing the intrinsic value of the stock.
3. Assist in finding undervalued stocks: Evaluation of stocks using intrinsic value and MOS can assist
investors in finding stocks that have a difference between the current market price and their intrinsic
value, investors can consider these shares as a good investment choice.
4. Assist in measuring company performance: Evaluation of shares using intrinsic value and the
Graham Number can assist investors in measuring company performance in the long term. Both of
these concepts measure company performance based on company fundamental data and not just
based on stock price movements in the short term.
5. Assist in improving portfolio quality: Evaluation of stocks using intrinsic value and the margin of
safety Graham number can assist investors in improving portfolio quality. Investors can look for
stocks that are valued with a large MOS and are projected to provide optimal returns in the long
term.

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III. RESEARCH METHOD

This research is included in quantitative research using a descriptive approach (Sekaran & Bougie,
2017). The data source used is secondary data obtained from www.idx.co.id and www.rti-business.com
in the form of company financial reports from 2018-2022 and stock closing price data for the
observation period on June 3, 2022. Data collection method This is done by collecting and identifying
data which then examines the company's financial performance (fundamental analysis) and observes
the stock market performance (technical analysis) of Islamic banking to conclude which stocks are
undervalued/cheap and overvalued/expensive. The population of this study is company shares that are
included in Islamic stocks and operate in the Islamic financial sector, while the research sample
selection technique uses a purposive sampling method with the criteria of companies that have been
IPO (Initial Public Offering) for more than five years. And the samples chosen were 3 Islamic banking
stocks consisting of shares of PT Bank Syariah Indonesia (BRIS), PT Bank BTPN Syariah (BTPS), and
PT Bank Panin Dubai Syariah (PNBS).
Research Variable
Table 2. Variable Operational Definition and Variable Measurement
Variable Meaning Formulas
Earning Per Share Namely the net profit earned by the
(EPS) company per share outstanding, where the 𝐸𝐴𝑇
profits and losses obtained by the 𝐸𝑃𝑆 =
company will be directly reflected in the 𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒
EPS value
Price to Earning That is the ratio to determine the fair price 𝑃𝑟𝑖𝑐𝑒
Ratio (PER) of a share by comparing the share price 𝑃𝐸𝑅 = ≤ 15
with earnings per share 𝐸𝑃𝑆
Book Value Per That is the value of the equity owned by 𝐸𝑞𝑢𝑖𝑡𝑦 𝑇𝑜𝑡𝑎𝑙
Share (BVPS) the company per share outstanding 𝐵𝑉𝑃𝑆 =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒
Price to Book That is the ratio to assess how
Value (PBV) expensive/cheap a stock is by comparing 𝑃𝑟𝑖𝑐𝑒
the stock price with the company's book 𝑃𝐵𝑉 = 𝐵𝑉𝑃𝑆 ≤ 1,5
value
Intrinsic Value That is the investment formula for
Graham Number calculating the intrinsic value of a
company recommended by Benjamin
Graham. Where the constant value of 22.5 𝐼𝑛𝑡𝑟𝑖𝑛𝑠𝑖𝑐 𝑉𝑎𝑙𝑢𝑒 𝐺𝑟𝑎ℎ𝑎𝑚 𝑁𝑢𝑚𝑏𝑒𝑟
is obtained from PER multiplied by PBV, = √22,5 𝑥 𝐸𝑃𝑆 𝑥 𝐵𝑉𝑃𝑆
that is, the PER of a good stock cannot be
more than 15 times, and the PBV of a
good stock cannot be more than 1.5 times.
Margins of Safety Namely the difference between the stock
𝑀𝑂𝑆 =
(MOS) price (market value) and the intrinsic (𝐼𝑛𝑡𝑟𝑖𝑛𝑠𝑖𝑐
𝑉𝑎𝑙𝑢𝑒 − 𝑃𝑟𝑖𝑐𝑒 𝑆𝑡𝑜𝑐𝑘)
value of the stock. According to Benjamin 𝑥100%
Graham, the MOS criterion or minimum 𝐼𝑛𝑡𝑟𝑖𝑛𝑠𝑖𝑐 𝑉𝑎𝑙𝑢𝑒
investment risk limit is 33%
Source: (Kurniawan, 2020).
The data analysis procedure used in the discussion of this research is to analyze the financial ratios
and stock market performance of Islamic banking with the following steps: a) Calculating earnings per
share, price earnings ratio, book value per share, and price to book value. b) Calculating the fair price
of shares/intrinsic value graham number. c) Comparing the margin of safety/MOS with stock intrinsic
to determine the value of the opportunity to gain from buying shares, then evaluate whether the shares
are in the category of undervalued/cheap or overvalued/expensive.

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Stock Valuation The Graham

Numbers Method

Intrinsic Margin Of
Value Safety

EPS PER BVPS PBV

Undervalue/Murah Overvalue/Mahal

Investment Recommendations
Sell or Buy or Hold
Figure 3. Thinking Framework

IV. RESULTS AND DISCUSSION

The Graham number method is a basic and fairly simple method that novice investors can learn
before choosing stocks to invest in a company by taking a stock valuation approach to the company's
earnings ratio. Namely comparing earnings per share, price to earnings ratio, book value per share, and
price to book value. Where the graham number criterion is a maximum PER ratio of 15 times and a
maximum PBV ratio of 1.5 times. The following table compares the earnings ratios of the three Islamic
banking stocks from 2018 to 2022.
Table 3. Comparison of Sharia Banking Stock Ratios for 2018-2022.
2018 2019 2020 2021 2022
BRIS EPS 11,1 7,71 223,23 74,4 78,75
PER 47,3 42,8 10,08 23,92 16,76
BVPS 522,58 528,96 2217,93 614,32 676,41
PBV 1,00 0,62 1,01 2,9 1,95
BTPS EPS 127,01 184,16 112,45 192,76 174,69
PER 14,13 23,08 33,35 18,57 15,23
BVPS 524,07 707,17 770,82 930,28 1042,59
PBV 3,43 6,01 4,86 3,85 2,55
PNBS EPS 0,88 0,56 -21,31 5,87 4,4
PER 56,82 89,29 -3,99 10,57 14,09
BVPS 70,34 71,44 81,08 59,91 61,72
PBV 0,71 0,7 1,02 1,42 1,00
Based on one of the Graham number criteria, a company that includes good performance is a
company that has an EPS of more than 30%. Based on the table above, it can be seen that BTPS shares
meet the Graham number criteria during the 2018-2022 timeframe. Meanwhile, BRIS shares have
caught up in the last three years. But different results have been obtained for PNBS shares, which are
far from the limit set by Graham's number, even in 2020 or the year when the Covid-19 pandemic
started, PNBS shares recorded a negative 21,31. A high EPS ratio is considered better because it can
reflect that the company is more efficient in generating profits compared to similar companies.
The PER size limit set by the Graham number is a company that has a PER value of less than 15
times, and the result is that among the three Islamic banking shares, PNBS shares meet the Graham
number criteria from 2021 to 2022. Meanwhile, BRIS and BTPS shares are classified as
overvalued/expensive, although in terms of overall in 2022 the PER ratio of the three Islamic bank
shares is only a slight difference from the graham number limit. In theory, the higher the PER value
indicates that the stock price is more expensive, and conversely, the lower the PER ratio, the cheaper
the stock (Budiman, 2020). But keep in mind that the PER ratio only measures stock price compared to
earnings per share / EPS, where movements and changes can be influenced by several stock market

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factors.
The PBV size limit set by the Graham number is a company that has a PBV value of less than 1.5
times, where for the last five years only Bank Panin Dubai Syariah (PNBS) shares have met the Graham
number criteria. Even so, the PBV value of BRIS shares is still relatively small except in the last two
years which exceeded the limit set by the Graham number, but this is different from the case with BTPS
shares which are too overvalued or in the expensive category. In theory, the higher the PBV indicates
that the stock price is more expensive, and vice versa, the smaller the PBV ratio, the cheaper the stock
(Budiman, 2020). However, keep in mind that the PBV ratio only measures stock price compared to the
book value per share / BVPS, where movements and changes can be influenced by several stock market
factors.
Table 4. Intrinsic Value and Margin of Safety
Indicator BRIS BTPS PNBS Benjamin Graham
Price Stock
Rp 1490 Rp 3100 Rp 67
(June 3, 2022) <22.5 = undervalued
Intrinsic Value Graham Number >22.5 = overvalued
Rp 1197 Rp 2233 Rp 71
(Normal price)
Margin of Safety (%) -24% -39% 7%
<33% = big risk
Overvalued Overvalued Undervalued
Category >33% = small risk
(Expensive) (Expensive) (Cheap)
Likewise, in the valuation of the fair price of shares or intrinsic value, the graham number method
is calculated by multiplying the last annual EPS and BVPS by 22.5. If you look at the table above, the
price of PNBS shares is lower than the intrinsic value of the Graham number, meaning that the shares
are considered undervalued or cheap, even though the value of the profit that investors will get or the
margin of safety is quite small, namely only 7% compared to the risk safety limit set by the Graham
number. less than 33%, in conclusion, PNBS shares have quite a big risk. While the other two stocks,
BRIS and BTPS, are both in overvalued or expensive conditions, even the percentage of MOS that
investors get reaches negative 24% for BRIS and negative 39% for BTPS. This can happen because the
share prices of the two Islamic banks have been highly valued by the market, where this situation can
generally be caused by trading volume activity that is so significant that it can affect the movement of
BRIS and BTPS stock prices to a greater extent than their fair price/intrinsic value. The decision to buy
or sell shares is entirely in the hands of the investor, but the researcher recommends holding back until
the MOS value is positive so as not to experience a large risk of loss.
Broadly speaking, the findings of this study are in line with the research of (Rakim et al., 2022),
(Yanuarsyah, 2021), (Wirawan & Sumirat, 2021), (Sari et al., 2020), (Yulita & Rahayu, 2019), and
(Sitorus & Hutasoid, 2017). That strategy for valuing stock portfolios by implementing the Benjamin
Graham number investment strategy can assist investors in making investment decisions, so they can
find maximum returns in the long term by minimizing potential risks. Even so, this method can be
rejected by the research of (Lin & Sung, 2014), that the Graham number method is considered too
simple because it is only focused on earnings ratios and stock price ratios, where changes can occur
depending on market conditions so that the returns that investors get do not change. can be optimal (Lin
& Sung, 2014). Therefore it is necessary to have a combination with other stock valuation methods that
can support and strengthen the determination of companies that are undervalued or overvalued and
prospects for company performance in the future (Jahan et al., 2016).
The method put forward by Benjamin Graham or the graham number is indeed very suitable when
applied to foreign stock markets such as America (Dow Jones Index) and the Indian stock market (Nifty
Index) (Srivastava & Kulshrestha, 2020) as international stock exchange trading centers. with a level
of market movement that is quite active and massive, but it is not wrong if we as investors can
implement this method on Indonesian stocks as anticipation of investors in minimizing the risk of losses
in the capital market, where stock movement activity is not only influenced by internal or external
factors alone but can also be influenced by micro and macroeconomic factors of the world.

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V. CONCLUSION
Based on the results of the discussion, the shares of sharia bank fall into the graham number
category, the first category in the EPS index should be above 30% for the past five years and only the
BTPS shares fall into the exceed. In addition, the maximum PER ratio category is 15 times, obtained
by the PNBS shares that met it in the last two years. Then the PBV ratio is less than 1.5 times, it is
obtained that the PNBS shares are included in the Graham number criterion. Meanwhile, the graham
number intrinsic value assessment category of PNBS shares is higher than the market price of PNBS
shares, which means that these shares are considered undervalued or cheap, even though the value of
the profit to be made by investors or the margin of safety is quite small, namely, only 7% compared to
the safety risk limit. Graham's number is set to less than 33%, in conclusion, PNBS stock can be put on
the stock recommendation buy wish list even though it carries no small risk. While the other two stocks,
BRIS and BTPS, are in overvalued or overpriced condition, even the percentage of MOS that investors
get reaches negative 24% for BRIS and negative 39% for BTPS. The three Islamic bank stocks
experience an overvalued/expensive condition above the criteria set by Benjamin Graham, the cause is
that investor euphoria is quite high regarding the news of the merger of Bank Syariah Indonesia so it
can be concluded that the three Islamic banking stocks have considerable investment risks. Therefore,
investors need to wait and see until the position of the Islamic bank's stock price is close to its fair price.

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