Margin of Safety (Investing)
Computes the margin of safety of an investment: how far the market price sits below the estimated intrinsic value, as a percentage. It's the core concept of Benjamin Graham's value investing — buying an asset for well less than it's worth to build in protection against estimation errors and surprises. The larger the margin, the more comfortable the purchase. A negative margin means the price already exceeds the estimated value. Enter the intrinsic value and the market price.
Result
—
Margin of Safety (Investing)
Computes the margin of safety of an investment: how far the market price sits below the estimated intrinsic value, as a percentage. It's the core concept of Benjamin Graham's value investing — buying an asset for well less than it's worth to build in protection against estimation errors and surprises. The larger the margin, the more comfortable the purchase. A negative margin means the price already exceeds the estimated value. Enter the intrinsic value and the market price.
Benjamin Graham's cushion
Every estimate of a company's value can be wrong. The future is uncertain, assumptions slip, the analyst miscalculates. Benjamin Graham, Warren Buffett's mentor, summed up the defense against this in three words: margin of safety. The idea is to buy an asset for well less than you think it's worth, leaving room to be wrong and still come out ahead.
The calculation is simple: how far the market price sits below the intrinsic value, as a percentage. A stock you value at 100 that the market sells at 70 has a 30% margin. That cushion is what separates the disciplined investor from the speculator. The harder the business is to predict, the larger the margin it makes sense to demand.
Enter the intrinsic value you estimated and the current market price. The tool returns the margin as a percentage; when it goes negative, it's a sign the price has already passed your value estimate. Remember the margin is only as good as the value estimate behind it, so the hard work is still valuing the company.
Related Tools
Equity Risk Premium (ERP)
Computes the equity risk premium: the extra return expected from investing in stocks rather than the risk-free rate. It's simply the expected market return minus the risk-free rate, and it serves as the central building block of the CAPM, multiplied by beta to estimate an asset's required return. The larger the premium, the more the market charges to take on equity risk. Enter the expected market return and the risk-free rate.
CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) between a start and end value over N years. Shows average annual growth of investments, revenue or KPIs. Everything in your browser.
ROI Calculator
Calculate Return on Investment (ROI) from invested amount and gain. Shows ROI percent, net profit and annualized ROI. Useful for investment analysis. Everything in your browser.
Rotation Speed (Takeoff)
Estimate the rotation speed (Vr) at takeoff, Vr = factor · Vstall, multiplying the stall speed by the safety margin (typically ~1.1). Vr is the speed at which the pilot pulls back to raise the nose and start the takeoff; it ensures enough margin above the stall at the critical moment. Enter the stall speed and the safety factor.
Cost of Preferred Stock
Computes the cost of capital of a preferred stock: the fixed annual dividend divided by the stock's market price, as a percentage. Since preferred stock usually pays a constant dividend, it behaves like a perpetuity, and its cost is the yield on that dividend. This figure goes into the WACC calculation as the cost of the preferred-capital slice. Enter the annual dividend and the preferred stock's price.
Capital Gains Yield
Computes the capital gains yield of an asset: the percentage price appreciation between the start and end of the period, (P1 − P0)/P0. It's the part of the total return that comes from the price change, not counting dividends — added to the dividend yield, it gives the stock's total return. It serves to separate how much of the gain came from appreciation and how much from income. Enter the starting price and the ending price.
The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.