Margin of Safety Calculator
Enter your estimated intrinsic value and the current price. This tells you the cushion — or lack of one — between what you think a stock is worth and what it costs today.
Are these calculators investment advice?
No. They do arithmetic. AlphaLens does the research. Every decision is yours.
Do the calculators store my portfolio?
Calculator inputs at /tools/ are processed in the browser. They are not treated as an account profile.
How to read this number
If your value estimate is right, this is the cushion. A positive margin of safety means the stock trades below what you believe it is worth — the bigger the gap, the more room for error in your estimate. A negative margin means the price is above your value estimate, so you are paying for assumptions that still have to come true. This calculator does not tell you to buy or sell; it only measures the distance between your number and the market's number.
Formula & assumptions
Worked example
Say you've estimated a stock's intrinsic value at $150/share using the Fair Value Stress Test's base case, and it currently trades at $110.
That 26.7% cushion means the price could be wrong — or your estimate could be too optimistic by that much — before you'd be overpaying relative to your own number.
Common mistakes
- Treating the intrinsic value as fact. This calculator only compares two numbers you supply. If the intrinsic value estimate is wrong, the margin of safety it produces is wrong in exactly the same way.
- Dividing by price instead of intrinsic value. The percentage margin is (Intrinsic − Price) / Intrinsic, not divided by Price — using the wrong denominator inflates the apparent cushion.
- Using one universal threshold for every stock. A durable, predictable business generally needs less margin than a cyclical or speculative one to be equally "safe."
- Letting the estimate go stale. An intrinsic value calculated before the last earnings report is being compared against today's price — recheck the estimate itself after anything that would move it.
Common questions
What is margin of safety in investing?
Margin of safety is the gap between your estimate of a stock's intrinsic value and its current price. It is the cushion that protects you if your estimate turns out to be too optimistic.
How is margin of safety calculated?
Margin of safety in dollars equals intrinsic value minus current price. As a percentage, it equals (intrinsic value minus price) divided by intrinsic value.
What margin of safety is considered good?
There is no universal number. Many value-oriented investors look for a meaningful cushion, but the right margin depends on how confident you are in your value estimate and the stock's risk.
Go deeper
Want an intrinsic value estimate instead of guessing one? Run the Fair Value Stress Test on any ticker.
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