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Formula sheet/NISM Series XV: Research Analyst/Fundamentals of Risk and Return
[ FUNDAMENTALS OF RISK AND RETURN ]

Margin of Safety & Share Liquidity Ratios

Margin of Safety(%)=[(Intrinsic Value−Current Market Price)/Intrinsic Value]×100\text{Margin of Safety} (\%) = [ (\text{Intrinsic Value} - \text{Current Market Price}) / \text{Intrinsic Value} ] \times 100
Stock Turnover Ratio=Number of Shares Traded in PeriodTotal Free Float Shares\text{Stock Turnover Ratio} = \dfrac{\text{Number of Shares Traded in Period}}{\text{Total Free Float Shares}}
Traded Value Turnover Ratio=Total Traded TurnoverTotal Market Capitalization\text{Traded Value Turnover Ratio} = \dfrac{\text{Total Traded Turnover}}{\text{Total Market Capitalization}}
Variables

Margin of safety provides a downside cushion against analytical errors and subjective forecast risks.

Worked examples
CAGR Calculation for Multi-Year Investment

An investor bought shares of an IT company for Rs 2,50,000 on 1st April 2021. On 1st April 2026 (5 years later), the investment value is Rs 6,20,000. Calculate the Compounded Annual Growth Rate (CAGR).

Benjamin Graham Margin of Safety (MOS)

An analyst estimates the intrinsic value of HDFC Bank at Rs 2,100 per share using a DCF model. The stock is currently trading on NSE at Rs 1,640. Calculate the Margin of Safety percentage.