FactorSage

Intrinsic Value · Lesson 1.8

Margin of Safety

Margin of safety (MOS) is the gap between a stock's intrinsic value and its current price, expressed as a percentage. It is the single most common buy and exit signal in FactorSage strategies.

What MOS measures

A positive MOS means the stock is trading below the intrinsic value you computed. A negative MOS means the market is paying more than your valuation says the business is worth.

MOS = (Intrinsic Value − Price) / Price
FactorSage exposes this as the MARGIN_OF_SAFETY field on every stock.

Using MOS in buy and exit rules

  • MARGIN_OF_SAFETY IS_AT_OR_ABOVE 0.20 — only buy when the stock trades 20% below intrinsic value.
  • MARGIN_OF_SAFETY IS_BELOW 0 — exit when price catches up to intrinsic value.
  • MARGIN_OF_SAFETY CROSSES_BELOW 0.05 — trigger an exit the day MOS drops through 5%.

Common mistakes

  • Treating a high MOS as proof of cheapness rather than asking why the market disagrees.
  • Using a single valuation model for MOS without sense-checking it against another.
  • Picking MOS thresholds that no business in your universe will ever hit.

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