{"id":9263,"date":"2023-02-08T19:31:34","date_gmt":"2023-02-08T11:31:34","guid":{"rendered":"https:\/\/slashtraders.com\/?p=9263"},"modified":"2026-01-20T20:04:27","modified_gmt":"2026-01-20T12:04:27","slug":"margin-of-safety-formula","status":"publish","type":"post","link":"https:\/\/slashtraders.com\/en\/blog\/margin-of-safety-formula\/","title":{"rendered":"Margin of Safety Formula to Level Up Value Investing"},"content":{"rendered":"<p class=\"wp-block-paragraph translation-block\">The principles of value investing tell us to buy stocks when the price is below the intrinsic value, so there is a higher probability of the stock price appreciating in the future.\nThe margin of safety is used to calculate the <a href=\"https:\/\/slashtraders.com\/en\/blog\/cash-secured-put\/\" target=\"_blank\" rel=\"noreferrer noopener\">discount on the stock value<\/a> before we enter the trade.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">We share what the margin of safety is, and a list of bullish stocks with a healthy margin of safety to buy. So you can <a href=\"https:\/\/slashtraders.com\/en\/blog\/best-value-investing-stocks\/\" target=\"_blank\" rel=\"noreferrer noopener\">purchase value stocks<\/a> while they are undervalued.<\/p>\n\n\n<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<span class=\"kKQl4OT93P7Je5CyH9xFJSMVdcBnsu8pUjE06fDz3W8wBCmThibWfANRGyroLmz12gSqNQIXI4pU5iKsta7MqPjR20ZdavrYh\"><iframe title=\"Level up Value Investing With Margin of Safety\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/HE_z693b1I8?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/span>\n<\/div><\/figure>\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is the Margin of Safety?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The margin of safety is a metric to reduce the risk of investing in stocks, by calculating the differences between a stock's intrinsic value and the purchase price.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">The principle of value investing developed by Benjamin Graham helps us <a href=\"https:\/\/slashtraders.com\/en\/blog\/fundamental-analysis-vs-technical-analysis\/\" target=\"_blank\" rel=\"noreferrer noopener\">estimate the intrinsic value of a stock by analysing a company's financial performance<\/a>. To reduce the investment risk from random price actions against our expectations, we only purchase the stock when the stock price is lower than the intrinsic value, when the margin of safety is a positive number.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is the Margin of Safety Formula?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When the intrinsic value is greater than the stock price, the investment has a positive margin of safety.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Margin of Safety = Intrinsic Value - Stock Purchase Price<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">To speed up our search for value investments, SlashTraders' stock pickers include the Upside metric to calculate the upside potential of each stock.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Upside = (Fair Value - Stock Price) \/ Stock Price * 100%<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">Upside lets us see <a href=\"https:\/\/slashtraders.com\/en\/blog\/bottom-out-stock-bull-put-spread\/\" target=\"_blank\" rel=\"noreferrer noopener\">undervalued stocks<\/a> in seconds. The greater the Upside is, the bigger margin of safety when investing at the current stock price.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is a Good Margin of Safety Ratio?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Since Fair Value is an estimation, we need a margin of safety to reduce risks in case the market goes against our expectations. The larger the margin of safety and Upside are, the higher confidence we have in the investment becoming profitable.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">We usually look for an Upside of 50% or more to have a large enough margin of safety to <a href=\"https:\/\/slashtraders.com\/en\/blog\/dollar-cost-averaging\/\" target=\"_blank\" rel=\"noreferrer noopener\">purchase the stocks<\/a>.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full\"><a href=\"https:\/\/slashtraders.com\/en\/pricing\/?utm_source=blog&amp;utm_medium=banner\" target=\"_blank\" rel=\"noopener\"><img fetchpriority=\"high\" decoding=\"async\" width=\"971\" height=\"120\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner.png\" alt=\"slashtraders trial banner\" class=\"wp-image-7387\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner.png 971w, https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner-300x37.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner-768x95.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner-18x2.png 18w\" sizes=\"(max-width: 971px) 100vw, 971px\" \/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Value Stocks With a Great Margin of Safety<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">The <a href=\"https:\/\/slashtraders.com\/en\/tools\/best-value-stocks\/\" target=\"_blank\" rel=\"noreferrer noopener\">Bullish Value Stock list<\/a> helps us find stocks with bullish potential. By filtering stocks with at least 50% Upside, we can find heavily undervalued stocks in seconds with great margin of safety.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"139\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/02\/50-upside.png\" alt=\"50% upside\" class=\"wp-image-9265\" srcset=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/02\/50-upside.png 1264w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/02\/50-upside-300x41.png 300w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/02\/50-upside-1024x139.png 1024w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/02\/50-upside-768x105.png 768w, https:\/\/slashtraders.com\/wp-content\/uploads\/2023\/02\/50-upside-18x2.png 18w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Filter value stocks with &gt;50% Upside.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">We sort the value stock list using the Upside to find value investing opportunities with a 189% to 50% bullish potential.<\/p>\n\n\n\n<table id=\"tablepress-46\" class=\"tablepress tablepress-id-46\">\n<thead>\n<tr class=\"row-1\">\n\t<th class=\"column-1\">Stocks<\/th><th class=\"column-2\">Description<\/th><th class=\"column-3\">Last<\/th><th class=\"column-4\">Fair value<\/th><th class=\"column-5\">Upside<\/th>\n<\/tr>\n<\/thead>\n<tbody class=\"row-striping row-hover\">\n<tr class=\"row-2\">\n\t<td class=\"column-1\">NSANY<\/td><td class=\"column-2\">Nissan Motor Co Ltd<\/td><td class=\"column-3\">$7.17<\/td><td class=\"column-4\">$20.75<\/td><td class=\"column-5\">189.4%<\/td>\n<\/tr>\n<tr class=\"row-3\">\n\t<td class=\"column-1\">VLKAF<\/td><td class=\"column-2\">Volkswagen AG<\/td><td class=\"column-3\">$180.25<\/td><td class=\"column-4\">$382.68<\/td><td class=\"column-5\">112.31%<\/td>\n<\/tr>\n<tr class=\"row-4\">\n\t<td class=\"column-1\">VFC<\/td><td class=\"column-2\">VF Corp<\/td><td class=\"column-3\">$30.73<\/td><td class=\"column-4\">$60.59<\/td><td class=\"column-5\">97.17%<\/td>\n<\/tr>\n<tr class=\"row-5\">\n\t<td class=\"column-1\">PK<\/td><td class=\"column-2\">Park Hotels &amp; Resorts Inc<\/td><td class=\"column-3\">$14.44<\/td><td class=\"column-4\">$27.87<\/td><td class=\"column-5\">93.01%<\/td>\n<\/tr>\n<tr class=\"row-6\">\n\t<td class=\"column-1\">LNC<\/td><td class=\"column-2\">Lincoln National Corp<\/td><td class=\"column-3\">$35.80<\/td><td class=\"column-4\">$66.97<\/td><td class=\"column-5\">87.07%<\/td>\n<\/tr>\n<tr class=\"row-7\">\n\t<td class=\"column-1\">PARA<\/td><td class=\"column-2\">Paramount Global<\/td><td class=\"column-3\">$24.55<\/td><td class=\"column-4\">$45.39<\/td><td class=\"column-5\">84.89%<\/td>\n<\/tr>\n<tr class=\"row-8\">\n\t<td class=\"column-1\">BAX<\/td><td class=\"column-2\">Baxter International Inc<\/td><td class=\"column-3\">$46.65<\/td><td class=\"column-4\">$84.44<\/td><td class=\"column-5\">81.01%<\/td>\n<\/tr>\n<tr class=\"row-9\">\n\t<td class=\"column-1\">IIPR<\/td><td class=\"column-2\">Innovative Industrial Properties Inc<\/td><td class=\"column-3\">$93.13<\/td><td class=\"column-4\">$166.13<\/td><td class=\"column-5\">78.39%<\/td>\n<\/tr>\n<tr class=\"row-10\">\n\t<td class=\"column-1\">GT<\/td><td class=\"column-2\">Goodyear Tire &amp; Rubber Co<\/td><td class=\"column-3\">$11.50<\/td><td class=\"column-4\">$20.38<\/td><td class=\"column-5\">77.22%<\/td>\n<\/tr>\n<tr class=\"row-11\">\n\t<td class=\"column-1\">BDN<\/td><td class=\"column-2\">Brandywine Realty Trust<\/td><td class=\"column-3\">$7.10<\/td><td class=\"column-4\">$12.35<\/td><td class=\"column-5\">73.94%<\/td>\n<\/tr>\n<tr class=\"row-12\">\n\t<td class=\"column-1\">FSNUY<\/td><td class=\"column-2\">Fresenius SE &amp; Co KGaA<\/td><td class=\"column-3\">$7.27<\/td><td class=\"column-4\">$12.47<\/td><td class=\"column-5\">71.53%<\/td>\n<\/tr>\n<tr class=\"row-13\">\n\t<td class=\"column-1\">KRC<\/td><td class=\"column-2\">Kilroy Realty Corp<\/td><td class=\"column-3\">$40.92<\/td><td class=\"column-4\">$69.46<\/td><td class=\"column-5\">69.75%<\/td>\n<\/tr>\n<tr class=\"row-14\">\n\t<td class=\"column-1\">SAM<\/td><td class=\"column-2\">Boston Beer Co Inc<\/td><td class=\"column-3\">$402.99<\/td><td class=\"column-4\">$665.48<\/td><td class=\"column-5\">65.14%<\/td>\n<\/tr>\n<tr class=\"row-15\">\n\t<td class=\"column-1\">PYPL<\/td><td class=\"column-2\">PayPal Holdings Inc<\/td><td class=\"column-3\">$85.49<\/td><td class=\"column-4\">$133.68<\/td><td class=\"column-5\">56.37%<\/td>\n<\/tr>\n<tr class=\"row-16\">\n\t<td class=\"column-1\">GOOGL<\/td><td class=\"column-2\">Alphabet Inc<\/td><td class=\"column-3\">$104.74<\/td><td class=\"column-4\">$161.80<\/td><td class=\"column-5\">54.48%<\/td>\n<\/tr>\n<tr class=\"row-17\">\n\t<td class=\"column-1\">KSS<\/td><td class=\"column-2\">Kohl's Corp<\/td><td class=\"column-3\">$34.93<\/td><td class=\"column-4\">$53.61<\/td><td class=\"column-5\">53.48%<\/td>\n<\/tr>\n<tr class=\"row-18\">\n\t<td class=\"column-1\">LUV<\/td><td class=\"column-2\">Southwest Airlines Co<\/td><td class=\"column-3\">$36.47<\/td><td class=\"column-4\">$55.59<\/td><td class=\"column-5\">52.43%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n<p class=\"wp-block-paragraph translation-block\">But we still need to investigate each company's background before investing to <a href=\"https:\/\/slashtraders.com\/en\/blog\/value-trap\/\" target=\"_blank\" rel=\"noreferrer noopener\">avoid buying into value traps<\/a>.<\/p>\n\n\n\n<p class=\"has-ast-global-color-4-background-color has-background wp-block-paragraph\"><a href=\"https:\/\/slashtraders.com\/en\/blog\/slashtraders-vs-sp500\/\" target=\"_blank\" rel=\"noreferrer noopener\">SlashTraders vs S&amp;P 500: 450% Outperformance, Verified Trades and How to Copy Every Alert<\/a><\/p>","protected":false},"excerpt":{"rendered":"<p>Margin of safety is used to calculate the discount on the stock value before we enter the trade. We share what the margin of safety is, so you can find value stocks in seconds.<\/p>","protected":false},"author":1,"featured_media":9266,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"plain-container","ast-site-content-layout":"normal-width-container","site-content-style":"unboxed","site-sidebar-style":"unboxed","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":"","_wp_rev_ctl_limit":"5"},"categories":[3],"tags":[56,12,64,59,11],"class_list":["post-9263","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-cn","tag-en","tag-es","tag-stocks","tag-tw"],"_links":{"self":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/9263","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/comments?post=9263"}],"version-history":[{"count":5,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/9263\/revisions"}],"predecessor-version":[{"id":14257,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/9263\/revisions\/14257"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/media\/9266"}],"wp:attachment":[{"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/media?parent=9263"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/categories?post=9263"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/slashtraders.com\/en\/wp-json\/wp\/v2\/tags?post=9263"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}