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Valuation buffer

Margin of Safety Calculator

Margin of safety measures the gap between an estimated intrinsic value and the price paid. It creates room for forecasting errors, adverse developments and normal valuation uncertainty.

Interactive calculator

Margin of Safety Calculator

Enter your assumptions and select Calculate. Values stay in your browser.

Formula behind the calculator

Margin of safety = (Intrinsic value − Price) / Intrinsic value × 100

The discount is measured against estimated intrinsic value. Upside to fair value uses the current price as its denominator, so the two percentages are not identical.

How to use it

  1. 1Estimate intrinsic value using more than one reasonable scenario.
  2. 2Enter the current price using the same currency and per-share basis.
  3. 3Compare the calculated buffer with the uncertainty and quality of the business.
  4. 4Revisit the inputs when fundamentals or your valuation assumptions change.

Interpret the result

  • A positive result means price is below your value estimate; a negative result means price is above it.
  • A larger percentage is not a substitute for business quality. An unreliable intrinsic value estimate can create a misleading buffer.
  • Required margins differ. Stable, understandable businesses may justify a smaller buffer than leveraged, cyclical or hard-to-forecast companies.

Go deeper

Margin of safety guide

Put the percentage into an investing process.

Intrinsic value calculator

Build a simplified cash-flow value estimate.

Intrinsic value vs. fair value

Clarify two often-confused valuation terms.

Frequently asked questions

What is a good margin of safety?

There is no universal threshold. The appropriate buffer depends on predictability, leverage, cyclicality and confidence in the valuation inputs.

Why is upside different from margin of safety?

Margin of safety divides by intrinsic value, while upside divides by current price. Different denominators produce different percentages.

Can margin of safety be negative?

Yes. A negative result means the market price exceeds the entered intrinsic value estimate.

Does a margin of safety eliminate risk?

No. It reduces exposure to estimation error but cannot protect against a permanently impaired business or incorrect analysis.

Should I use one intrinsic value estimate?

A scenario range is better. Calculate the buffer against a conservative case as well as a central estimate.