Margin of safety is the gap between what a share costs and what it is worth, expressed as a percentage of intrinsic value. The Margin of Safety Calculator builds three independent estimates of intrinsic value from one price, an earnings per share figure, a growth rate, a target P/E and a discount rate, averages them, and measures how far the current price sits below that average. A gap of at least 33 percent means Buy; between 0 and 33 percent it is Hold; below zero it is Avoid.
The three intrinsic value estimates
The first estimate follows Graham: EPS times 8.5 plus twice the growth rate. With 5 EPS and 12 percent growth that is 5 x (8.5 + 24) = 162.50. The second is a pure multiple: EPS times the target P/E, here 5 x 15 = 75.00. The third discounts five years of growing EPS and adds a terminal value. A P/E & PEG Ratio Calculator shows the same P/E input from the multiple side, which helps when you want to test whether a target of 15 is aggressive for the sector.
What the PEG lens adds
PEG divides the P/E by the growth rate. The target multiple of 15 at 12 percent growth gives 15 / 12 = 1.25, at the upper edge of the band most investors treat as fair. The PEG ratio guide shows how the 1.0 line is derived and where 1.25 sits for a company growing at that pace.
Why the DCF branch needs a guard
The DCF branch runs only when the discount rate beats the growth rate; otherwise a growing perpetuity has no finite present value. Here 14 percent exceeds 12 percent, so five years of EPS discounted at 14 percent plus the terminal value total 280.00. With the defaults, 10 percent growth against a 10 percent discount rate, the guard fails and the tool falls back to EPS x target P/E x 1.2, landing at 90.00 with a note. Discounting is compounding run backwards, and the Compound Interest Calculator is a quick way to check whether 14 percent feels right as a hurdle.
How the 42.0 percent verdict is built
The three estimates average to (162.50 + 75.00 + 280.00) / 3 = 172.50. The margin of safety is (172.50 - 100) / 172.50 = 42.0 percent, which clears the 33 percent line and returns Buy. The same intrinsic value at a 120 price gives 30.4 percent and Hold, at 150 it gives 13.0 percent and Hold, and at 180 it gives -4.3 percent and Avoid: the value never moves, only the price does. A P/E P/B Valuation tool cross-checks the 100 price against book value and shows whether the P/E side of the average is already rich.
The 33 percent line and a growth sanity check
The threshold bar marks the 33 percent Buy line, and the bar width grows at three times the margin, so 42.0 percent nearly fills it. The growth input drives two of the three estimates, which makes 12 percent the load-bearing number: at 12 percent a base value doubles in about 72 / 12 = 6 years. The rule of 72 guide covers the arithmetic and the limits of the rule, and the limits matter because the Graham estimate grows linearly with the input and overshoots if 12 percent is an outlier year.
Where this fits in a valuation pipeline
In a full pipeline the margin of safety comes last. You size the company with the market cap guide, you confirm the growth rate with the CAGR Calculator, and only then does the margin decide whether the current price is worth buying. The default case on the tool, a 150 price with 5 EPS, 10 percent growth, 15 P/E and a 10 percent discount rate, lands at an average of 102.50 and a margin of -46.3 percent: Avoid, which is exactly the point, a fair price is not a cheap price.