Margin of safety
The margin of safety is the gap between the price you pay and what the business is conservatively worth. The idea comes from Benjamin Graham, and its purpose is widely misunderstood: it isn’t a way to boost returns. It’s a way to survive being wrong.
Every estimate of a company’s value is fuzzy. Buy at a price close to your estimate, and any error in your analysis lands directly on you. Buy at a meaningful discount, and the discount absorbs the error first — your analysis can be substantially mistaken and the outcome can still be acceptable. The margin of safety converts fuzziness from a threat into a cushion.
How the Moat Index measures this
For each scored company we compare a conservative intrinsic value per share — capitalized from owner earnings, per the methodology — against the recent market price. The result is a percentage discount or premium, shown on company pages, in the analyzer, and as a screener column. Because the valuation assumptions are deliberately conservative, many fine businesses show a premium most of the time — the interesting moments are when they don’t, which is exactly what Quality on Sale watches for. Unlike the Moat Score, this number moves with the market price. A discount is a starting point for reading, not a buy signal.