Margin of Safety Calculator

Calculate the margin of safety using Benjamin Graham's value investing principles

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Understanding Margin of Safety

Graham Number

Created by Benjamin Graham, this formula finds stocks trading below intrinsic value:

Graham Number = √(22.5 × EPS × Book Value)

The 22.5 comes from Graham's belief that P/E should not exceed 15 and P/B should not exceed 1.5 (15 × 1.5 = 22.5).

P/E Fair Value

Estimates fair value based on earnings relative to industry average:

Fair Value = EPS × Industry Average P/E

Assumes the stock should trade at the average P/E ratio for its sector.

Undervalued (25%+)

Strong buying opportunity with significant safety buffer.

Fair Value (±10%)

Trading near estimated value. Limited margin for error.

Overvalued (-25%)

Higher risk. Consider waiting for better entry point.

Disclaimer: This calculator is for educational purposes only. Stock valuations are estimates and involve uncertainty. The Graham Number and P/E methods have limitations and may not be suitable for all stocks (especially growth stocks or companies with negative earnings). Always conduct thorough research before investing. This is not financial advice.

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