Margin of Safety Calculator
The price that leaves room for your valuation to be wrong.
The cushion exists because your intrinsic value is an estimate built on assumptions that will be partly wrong. A 30% margin means overestimating value by 30% still leaves you whole. Graham argued for 33% or more; the right number rises with how uncertain the business is, not with how much you want to own it.
Worked example. You estimate intrinsic value at $100 and want a 30% cushion, so your buy price is $70. At today’s $80 the stock trades at a 20% discount with 25% upside, which is genuinely below value but not yet below the price your margin demands. That gap is the discipline: cheap is not the same as cheap enough.
Frequently asked questions
Where does the idea come from?
Benjamin Graham, and it is the central idea in value investing. His argument was not that a discount improves returns but that it absorbs error, because any intrinsic value estimate rests on assumptions that will be partly wrong.
How large should the margin be?
Graham argued for a third or more. In practice it should scale with uncertainty: a stable utility with predictable cash flows justifies a smaller cushion than a cyclical business or one facing technological change. Wanting to own something is not a reason to shrink it.
How do I estimate intrinsic value?
A discounted cash flow, a dividend discount model, the Graham number, or an earnings multiple applied to normalised earnings. Each rests on assumptions, which is exactly why the margin exists. Running two methods and taking the lower is a common discipline.
Does a margin of safety guarantee a good outcome?
No. It reduces the damage when you are wrong; it cannot prevent being wrong. A cheap stock can stay cheap for years, and a business can deteriorate faster than any cushion covers.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.