How this number is made
The margin of safety is the gap between a value you are willing to defend and the price on offer, divided by that value. The page does not decide the value. If the price is above the value, the gap is negative: you are paying more than the value you typed.
- The value has to be your number, from a model or a liquidation, stated before you look for comfort.
- Use the same unit for both, per share or for the whole company.
Formula
Margin of safety = (value − price) ÷ value.
Worked example
With the figures already in the form, margin of safety is 30.0%.
Questions
What margin is enough?
Graham wrote about a large gap because the value might be wrong. This page does not supply the gap that makes a value safe.
Can the value be the model price from another page?
Yes. Carry it yourself. This page will not fetch it.