Calculate the margin of safety percentage between intrinsic value and market price for value investing analysis and stock screening.
Compare an investment's current market price with your estimate of its intrinsic value. The calculator expresses the difference as a percentage of intrinsic value, making discounts easier to compare across securities with different prices. When intrinsic value is positive, a positive result means the market price is below the entered valuation, zero means they are equal, and a negative result means the price exceeds the valuation. Nonpositive intrinsic values are invalid for this interpretation. The common mistake is treating intrinsic value as an observed fact. It is an estimate, so the result is only as reliable as the valuation entered.
A concrete input and expected output from the current implementation.
Input
Intrinsic value per share: $100 Market price per share: $70
Expected output
Margin of safety: 30%
The price is $30 below the $100 intrinsic value. Dividing $30 by $100 and multiplying by 100 gives a 30% margin of safety.
The calculation is (intrinsic value - market price) / intrinsic value x 100. Intrinsic value is therefore the percentage base. For example, a $30 gap from a $100 valuation is 30%, not the approximately 42.86% obtained by dividing that gap by the $70 market price.
For a positive intrinsic value, a result above 0% indicates that the entered market price is below the entered intrinsic value. A 0% result indicates no gap. A result below 0% indicates that the market price is above the valuation estimate. Zero intrinsic value makes the calculation undefined, while a negative intrinsic value reverses the sign interpretation and is invalid for this use.
No. This calculator measures the shortfall from intrinsic value using intrinsic value as the denominator. Percentage upside commonly measures a potential gain from the current market price and uses market price as the denominator. With intrinsic value of $100 and price of $70, margin of safety is 30%, while upside to $100 is approximately 42.86%.
No. The calculation reports a relationship between two entered values; it does not set a purchase rule. An acceptable margin depends on confidence in the valuation, assumptions about the business, financial risk, and the investor's objectives. Testing several plausible intrinsic values can show how sensitive the percentage is to valuation uncertainty.
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