I have always thought of the margin of safety calculation for stocks differently than the formula you give. I've always calculated it as 1-(market value/intrinsic value). For example, if a stock's market value is $20 and the intrinsic value is $30, I see that as a 33.3% margin of safety whereas your formula results in a 50% margin of safety.

If you take it to the extreme, your formula results in nonsensical numbers to me. For example, if the market value is $5, and the intrinsic value remains $30, the margin of safety is 500%, while the way I have traditionally calculated it, I get an 83% margin of safety. In my mind, the margin of safety can't exceed 100%.

I have always used the formula you give to calculate my potential return (assuming my intrinsic value estimate is correct), but calculate the margin of safety differently.

I've searched my value investing library and while there is much discussion about the margin of safety, I can't find an actual formula detailing how to calculate it.

So food for thought, the concept is the key issue, but I'd like get your take on the different ways to calculate it.