Here we report a list of nine stocks that appear to be highly undervalued – not only are they trading at steep discounts to mean analyst target price, they are also deeply undervalued from their Graham equation's fair value.

Benjamin Graham, the man who developed the equation for the Graham number, was a former mentor of Warren Buffett and is the so-called "Godfather" of value investing.

The Graham Number, or the maximum price an investor should pay for a stock, is derived using only two data points: current earnings per share and current book value per share.

The Graham Number = Fair Value of a Stock = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share).

The math of the Graham number is relatively straightforward. It is based on the belief that the price-to-earnings (P/EPS) ratio should be no more than 15, and the price-to-book value (P/BVPS) ratio should be no more than 1.5. Therefore we only include companies that meet both of these criteria.

From these criteria, the product of the two should not be more than 22.5. In other words, (P/EPS of 15) x (P/BVPS of 1.5) = 22.5, from which the equation was created.

We ultimately found 9 stocks that met all of these requirements to appear undervalued, as well as being deeply undervalued from target price.

We will admit that target price suffers from an upward bias; however, when a stock is trading at a steep discount to target price, it can indicate that it is oversold.

Do you think these stocks should be trading higher? Use this list as a starting-off point for your own analysis.

List sorted by potential upside implied by target price.

* 1. American Greetings Corp. (NYSE:AM-OLD): *Business Services Industry. Market cap of $917.94M. Target price at $32.00 vs. current price at $23.07 (implies a potential upside of 38.71%). BVPS at $18.53, diluted EPS at $2.11. Graham number = sqrt(22.5 x $18.53 x $2.11) = $29.66. Current price at $23.07 (implies a potential upside of 28.57%). The stock is a short squeeze candidate, with a short float at 20.03% (equivalent to 32.24 days of average volume). The stock has gained 3.65% over the last year.

* 2. Gentiva Health Services Inc. (NASDAQ:GTIV):* Home Health Care Industry. Market cap of $719.55M. Target price at $31.88 vs. current price at $23.22 (implies a potential upside of 37.30%). BVPS at $21.47, diluted EPS at $1.84. Graham number = sqrt(22.5 x $21.47 x $1.84) = $29.81. Current price at $23.22 (implies a potential upside of 28.38%).

* 3. Advance America, Cash Advance Centers Inc. (NYSE:AEA):* Credit Services Industry. Market cap of $357.72M. Target price at $8.00 vs. current price at $5.97 (implies a potential upside of 34.00%). BVPS at $4.00, diluted EPS at $0.65. Graham number = sqrt(22.5 x $4.00 x $0.65) = $7.65. Current price at $5.97 (implies a potential upside of 28.14%). This is a risky stock that is significantly more volatile than the overall market (beta = 3.03). The stock has had a good month, gaining 15.03%.

* 4. Magna International, Inc. (NYSE:MGA):* Auto Parts Industry. Market cap of $11.63B. Target price at $64.51 vs. current price at $48.44 (implies a potential upside of 33.18%). BVPS at $35.15, diluted EPS at $4.50. Graham number = sqrt(22.5 x $35.15 x $4.50) = $59.66. Current price at $48.44 (implies a potential upside of 23.16%). The stock has gained 44.37% over the last year.

* 5. Wells Fargo & Company (NYSE:WFC): *Money Center Banks Industry. Market cap of $146.14B. Target price at $36.93 vs. current price at $27.77 (implies a potential upside of 32.99%). BVPS at $23.18, diluted EPS at $2.43. Graham number = sqrt(22.5 x $23.18 x $2.43) = $35.60. Current price at $27.77 (implies a potential upside of 28.20%). The stock has lost 3.49% over the last year.

* 6. Hess Corporation (NYSE:HES): *Oil & Gas Refining & Marketing Industry. Market cap of $26.31B. Target price at $99.69 vs. current price at $78.20 (implies a potential upside of 27.48%). BVPS at $52.83, diluted EPS at $7.59. Graham number = sqrt(22.5 x $52.83 x $7.59) = $94.98. Current price at $78.20 (implies a potential upside of 21.46%). The stock has gained 49.18% over the last year.

* 7. Avnet Inc. (NYSE:AVT): *Electronics Wholesale Industry. Market cap of $5.31B. Target price at $43.36 vs. current price at $34.71 (implies a potential upside of 24.92%). BVPS at $24.45, diluted EPS at $3.71. Graham number = sqrt(22.5 x $24.45 x $3.71) = $45.18. Current price at $34.71 (implies a potential upside of 30.16%). The stock has gained 26.84% over the last year.

* 8. National Interstate Corporation (NASDAQ:NATL): *Property & Casualty Insurance Industry. Market cap of $410.18M. Target price at $26.00 vs. current price at $20.98 (implies a potential upside of 23.93%). BVPS at $16.38, diluted EPS at $1.97. Graham number = sqrt(22.5 x $16.38 x $1.97) = $26.95. Current price at $20.98 (implies a potential upside of 28.46%).

* 9. Arrow Electronics, Inc. (NYSE:ARW): *Electronics Wholesale Industry. Market cap of $4.92B. Target price at $52.55 vs. current price at $42.81 (implies a potential upside of 22.75%). BVPS at $30.01, diluted EPS at $4.47. Graham number = sqrt(22.5 x $30.01 x $4.47) = $54.94. Current price at $42.81 (implies a potential upside of 28.33%). The stock has gained 60.06% over the last year.

*BVPS and diluted EPS sourced from Yahoo! Finance, target price and all other data sourced from Finviz.

**Disclosure: **I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.