1. What is Safety Margin?

The Safety Margin is the difference between a stock's intrinsic value and its current market price. It represents the buffer an investor has against potential losses and is a key concept in value investing.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Intrinsic Value — The true value of an asset based on fundamental analysis
• Market Price — The current trading price of the asset

Explanation: A positive safety margin indicates the stock is undervalued, while a negative margin suggests overvaluation.

3. Importance of Safety Margin

Details: The safety margin provides protection against errors in intrinsic value estimation and market volatility. Benjamin Graham recommended at least a 30-50% margin for conservative investments.

4. Using the Calculator

Tips: Enter both values in USD. The intrinsic value should be your carefully calculated estimate of the company's true worth.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good safety margin?
A: Generally, 20-30% is acceptable, 30-50% is good, and above 50% is excellent, though this depends on the investor's risk tolerance.

Q2: How do I calculate intrinsic value?
A: Common methods include discounted cash flow analysis, dividend discount models, and asset-based valuation.

Q3: Does a positive safety margin guarantee profits?
A: No, it only indicates potential undervaluation. Market conditions and company fundamentals may change.

Q4: Should I only invest when there's a safety margin?
A: While not mandatory, it's a prudent approach that can reduce risk and increase potential returns.

Q5: Can safety margin be negative?
A: Yes, a negative value means the market price exceeds your estimate of intrinsic value, suggesting overvaluation.