1. What is Margin of Safety?

The Margin of Safety (MOS) is a financial metric that measures the difference between a stock's intrinsic value and its current market price. It represents the "safety buffer" for investors against potential losses or valuation errors.

2. How Does the Calculator Work?

The calculator uses the Margin of Safety formula:

Where:

• \( Market Price \) — Current trading price of the stock (USD)
• \( Intrinsic Value \) — Estimated true value of the stock (USD)

Explanation: The higher the MOS percentage, the greater the discount between the market price and intrinsic value, indicating a potentially safer investment.

3. Importance of Margin of Safety

Details: A sufficient margin of safety protects investors from errors in calculation, market volatility, and unexpected business downturns. Benjamin Graham recommended at least 50% MOS for defensive investors.

4. Using the Calculator

Tips: Enter the current market price of the stock and your calculated intrinsic value (in USD). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good margin of safety percentage?
A: Generally, 20-30% is considered reasonable, but conservative investors might require 50% or more.

Q2: How do I determine intrinsic value?
A: Common methods include discounted cash flow analysis, earnings multiples, or asset-based valuation.

Q3: Can MOS be negative?
A: Yes, a negative MOS means the market price exceeds your intrinsic value estimate, suggesting overvaluation.

Q4: Does MOS guarantee investment safety?
A: No, it's one tool among many. The quality of your intrinsic value calculation is crucial.

Q5: Should I only consider MOS when investing?
A: No, combine MOS with other fundamental analysis metrics and qualitative factors.