Margin of Safety Calculator
Three numbers in, two prices out: what a share is arguably worth today if your growth estimate holds, and half of that. The second number is the one the method cares about, because it is the one that survives you being wrong.
Your numbers
Trailing twelve months, diluted. On a US filing it is the bottom line of the income statement.
Be stingy here. The lower of the company's own ten-year rate and analyst consensus is a defensible place to start.
When you supply it, it becomes a ceiling on the future multiple — the arithmetic will not assume the market pays more for this business later than it does today.
Assumptions you can change
The discount rate. Raise it and every price below falls.
The haircut taken off the sticker price.
Pre-filled with an example so the page shows a real calculation. Change any number.
Result
Margin of safety price
$22.11
Half the sticker price. The discount is what pays for your growth estimate being optimistic.
Enter an EPS above zero and a growth rate above zero to see a price.
- Future EPS projected to year 10 from today
- $9.94
- Future P/E used double the growth rate capped at 50× capped at your current P/E
- 18.0×
- Sticker price What a share is worth today if the projection lands exactly.
- $44.22
Stop retyping this
A watchlist in the app pulls EPS, free cash flow and growth rates straight from the filings, re-runs all three models whenever a new one lands, and keeps the history so you can see what changed. Coverage today is US-listed stocks.
Free plan. No card.
An educational tool. The output is arithmetic on figures you entered — not a recommendation, not a valuation of any particular company, and not a view on whether a price will move. A cheap price and a good business are different things.
How the number is built
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Project the earnings.
Compound today's EPS at your growth rate for the full horizon. This is the only step where you supply an opinion; everything after it is arithmetic.
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Pick a multiple, grudgingly.
Double the growth rate to get a P/E — 12% growth gives 24×. Cap it at 50× however fast the business is compounding. If you entered a current P/E, cap it there too, so the model never quietly assumes a re-rating upward.
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Discount it back to today.
Divide by one plus your required return, once for every year of the horizon. That rate is the return you are demanding, so a price that clears this step is one where earning it is the base case rather than the upside.
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Take half.
The margin of safety. Not a forecast that the price will fall this far — a rule that only a price where being half wrong still leaves you whole is worth considering.
The defaults, and why
- 15% required return. The rate the discount step uses, and the return the method demands rather than hopes for.
- 50% margin of safety. Halving the sticker price is the whole point of the model; it is the only step that costs you nothing to be wrong about.
- Future P/E capped at 50×. A ceiling on optimism, applied before your current-P/E ceiling.
- Ten-year horizon. Long enough for a durable advantage to show up in the earnings, short enough that it is still arithmetic rather than fiction.
What this will not do
- It cannot tell you the growth rate. That figure is a judgement about a business, and the calculator will compound whatever you type — including something indefensible.
- It says nothing about whether the business will still be standing in ten years. Price is the last question, not the first.
- Near-zero or negative EPS breaks it. For companies in that state the cash-flow model is the one to reach for.
- It has no idea what a reasonable multiple is for this industry. The doubled-growth rule is a blunt instrument on purpose.