# Calculation Guidance 5 – MOS (Margin of Safety)

How does the MOS affect a stock’s score?

The higher the MOS (Margin of Safety), the higher the potential returns you will make. MOS is the difference between the Share Price and Fair Value, where Fair Value is the real value of the stock.

Think of it like buying \$10 bills for \$5. You should always look for a deal in the market.

If you see a MOS change but the share price has not changed, what does that mean?

This means the EPS (Earnings Per Share) has changed.

EPS Calculation: Net Income/Outstanding Shares

If the MOS has declined while the Share Price remains the same, this means the EPS has declined, which essentially means the Net Income has declined. In other words, the business is becoming less profitable which is a bad sign.

If the MOS has increased while the Share Price remains the same, this means the EPS has increased which essentially means the Net Income has increased. In other words, the business is becoming more profitable which is a good sign.

MOS Calculation: 100%-(Share Price/Fair Value)