Glossary · Valuation

Buy price (margin of safety)

The fair value minus a safety margin. Below this price we call a stock undervalued.

Why it matters

Every valuation can be wrong. Asking for a discount before buying means small mistakes don’t turn into losses. Benjamin Graham called this the margin of safety.

How to read it

Riskier businesses get a wider margin, so their buy price sits further below fair value.

Also called: margin of safety

Related

Fair valueOur estimate of what one share is worth, based on the cash the business can produce.Price verdictOur one word read on price: below fair value, within the fair range, above it, or speculative.

In the Cluenex app, this explanation opens next to every buy price (margin of safety) figure, with the live reading for the stock you are looking at. Open it in Cluenex