Can I screen using Margin of Safety?
Unfortunately we aren't currently supporting the ability to screen by valuation discounts or 'margin of safety'. To date, we have been reluctant for a few reasons:
- James Montier once said that the trouble with DCF is that it's like using a telescope in the night sky, shift a fraction to the left and you can end up in another galaxy! All our screening ratios are currently very factual, and based on hard data whereas DCF, EPV and so on do require a fair number of assumptions.
- We currently apply a set of global assumptions to the database to create an approximate 'guide' to intrinsic value through these techniques for individual stocks but worry that if used as a screening tool the outliers may appear misleadingly attractive.
- As we explain on the models, the pre-defined values are simply a starting point - any resulting valuation outputs are necessarily generic and are not endorsed for a given stock by Stockopedia. Instead, you should amend the key assumptions (such as the discount rate or the Graham LT Growth rate) as you see fit depending on the specific circumstances of the stock. The success of a model is highly dependent on the quality of the inputs (this is known as "garbage in, garbage out").