Margin of Safety Calculator
Calculate the margin of safety between a stock's intrinsic value and market price. As Benjamin Graham wrote: "The margin of safety is always dependent on the price paid."
Core Inputs
Your estimate of what the stock is actually worth
Graham recommended at least 30%. Adjust based on business quality.
Formula
MoS = (Intrinsic Value - Market Price) / Intrinsic Value × 100%
Margin of Safety
33.3%
Upside / Downside
+50.0%
Max Buy Price
$84.00
Meets your 30% required margin of safety. The current price provides adequate downside protection.
Scenario Analysis
Test your margin of safety across bull, base, and bear case valuations. Weighted average uses 25% bull, 50% base, 25% bear.
Weighted Avg MoS
32.6%
Weighted IV: $118.75
Bull Case
MoS: 46.7%+87.5%
Base Case
MoS: 33.3%+50.0%
Bear Case
MoS: 5.9%+6.3%
Weights: Bull 25% | Base 50% | Bear 25%. Adjust intrinsic values to reflect your confidence in each scenario.
How It Works
- 1Enter your estimated intrinsic value (from a DCF, EPV, Graham Formula, or other valuation method).
- 2Enter the current market price of the stock.
- 3Set your required margin of safety threshold (Graham recommended at least 30%).
- 4The calculator shows whether the stock meets your threshold and calculates the maximum buy price.
- 5Use Scenario Analysis to test bull, base, and bear case valuations against the current price.
Frequently Asked Questions
What is margin of safety in investing?
Margin of safety is a principle popularized by Benjamin Graham in "The Intelligent Investor." It means buying a stock at a significant discount to its estimated intrinsic value. This discount acts as a buffer — if your valuation is wrong, if the business deteriorates, or if the market drops, the discount protects you from permanent capital loss. It's calculated as: (Intrinsic Value - Market Price) / Intrinsic Value × 100%.
What is a good margin of safety percentage?
Benjamin Graham typically required at least 33% (one-third) margin of safety. Warren Buffett has described wanting a significant discount but is willing to accept less for wonderful businesses. A common framework: 20-30% for high-quality, stable businesses with predictable earnings; 30-50% for average businesses or those with more uncertainty; 50%+ for turnarounds, cyclicals, or situations with significant risk. The more uncertain the valuation, the higher the margin of safety should be.
How do I calculate intrinsic value to use with this calculator?
There are several methods: (1) DCF Analysis — projects future free cash flows and discounts them back to present value. (2) Earnings Power Value — divides normalized earnings by a discount rate. (3) Graham Formula — uses EPS, growth rate, and bond yields. (4) Asset-based valuation — calculates net asset value per share. Try our Intrinsic Value Calculator or DCF Calculator to estimate intrinsic value, then use this tool to check the margin of safety.
Why use scenario analysis instead of a single intrinsic value?
No valuation is precise. Scenario analysis forces you to think about a range of outcomes rather than anchoring to one number. By weighting bull (25%), base (50%), and bear (25%) cases, you get a probability-weighted intrinsic value that accounts for uncertainty. If the stock has a margin of safety even in your bear case, that's a much stronger signal than a margin of safety only in your bull case.
What is the difference between margin of safety and upside?
They're related but different. Margin of safety = (Intrinsic Value - Price) / Intrinsic Value. Upside = (Intrinsic Value - Price) / Price. For example, if a stock's intrinsic value is $100 and the price is $70: margin of safety is 30% (you're buying at a 30% discount to value), while upside is 42.9% (the stock could rise 42.9% to reach intrinsic value). Margin of safety focuses on protection; upside focuses on potential return.
Should I use the same margin of safety for every stock?
No. The required margin of safety should scale with uncertainty. For a company like Coca-Cola with decades of stable earnings, a 15-20% margin of safety may be sufficient because you can estimate intrinsic value with reasonable confidence. For a biotech startup or a cyclical mining company, you'd want 40-50%+ because the range of possible outcomes is much wider. Match the margin of safety to the quality and predictability of the business.