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Margin Of Safety


Margin of safety is a principle of investing in which an investor only purchases securities when their market price is significantly below their intrinsic value. In other words, when the market price of a security is significantly below your estimation of its intrinsic value, the difference is the margin of safety.

A value of 0% means that the intrinsic value of future cashflow is priced the same as the current market price and there is no margin of safety. A margin of safety of 100% means that the value of future cashflows is twice the current value of the company.

How We Calculate It

Margin Of Safety = The intrinsic value of 10 years future cashflows discounted back to the present at the safe return rate per share divided by the current price per share.

Formula Function

(fundamentals, quote)=>{ return getPredictedFutureValuePrice(fundamentals, quote) / quote.price - 1; }

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