"Justified P/E" is the multiple a business deserves, built up from its own quality and growth characteristics — as opposed to whatever multiple the market happens to be paying today.
Justified P/E = 15 x Quality Adjustment x Growth Adjustment
The starting point: 15. A rough, long-run-average market multiple for an unremarkable, no-growth business — the same spirit as Graham's "8.5" baseline in his formula, adapted for a forward P/E context.
Quality adjustment. If a company's 5-year average return on invested capital (ROIC) is above 15%, it gets the full 1.0x multiplier — real evidence of a durable competitive advantage. Below that threshold, it gets a more conservative 0.8x, since average returns on capital are a weaker signal of a moat worth paying up for.
Growth adjustment. Adds up to 1 point of multiple for every half-point of expected growth (1 + 2g), capped at 2.0x — so justified P/E can range from 12 (low quality, no growth) up to a hard ceiling of 30 (high quality, high growth). That ceiling exists on purpose: no conservative valuation framework should imply paying more than 30x earnings, no matter how exciting the growth story.