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Wondering if Berkshire Hathaway at around US$473 a share offers value or risk at this point? The next sections break down what the current price could be implying about the business.
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The stock is roughly flat over the past month with a 0.8% return over 7 days, a 0.9% decline over 30 days, a 4.8% decline year to date and a 12.4% decline over the last year, while the 3 year and 5 year returns of 46.0% and 62.6% show a very different picture over longer periods.
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Recent headlines around Berkshire Hathaway have kept attention on how its large portfolio of public holdings and wholly owned businesses may be priced relative to expectations, particularly as investors reassess diversified financial groups more broadly. This context helps explain why short term returns look muted compared to the longer term figures.
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Berkshire currently scores 5 out of 6 on Simply Wall St's valuation checks, suggesting it screens as undervalued on most of the methods applied. You can see this in the full valuation breakdown at a value score of 5. The rest of this article will walk through those approaches before finishing with a way to think about valuation that goes beyond the usual ratios.
Find out why Berkshire Hathaway's -12.4% return over the last year is lagging behind its peers.
Approach 1: Berkshire Hathaway Excess Returns Analysis
The Excess Returns model looks at how much profit a company can generate above its estimated cost of equity, then capitalizes those extra profits to arrive at an intrinsic value per share. It is less about short term earnings and more about how effectively each dollar of shareholder capital is used.
For Berkshire Hathaway, the model uses a Book Value of US$498,663.02 per share and a Stable EPS of US$67,475.56 per share, based on the median return on equity from the past 5 years. The implied Cost of Equity is US$41,297.79 per share, so the Excess Return is US$26,177.77 per share. That reflects an average Return on Equity of 12.21% and a Stable Book Value of US$552,709.18 per share, drawn from weighted future Book Value estimates from 2 analysts.
Putting these inputs together, the Excess Returns valuation produces an intrinsic value of about US$797.24 per share. Against a current share price around US$473, the model implies the stock is about 40.7% undervalued based on these assumptions.
Result: UNDERVALUED
Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 40.7%. Track this in your watchlist or portfolio , or discover 51 more high quality undervalued stocks .
Approach 2: Berkshire Hathaway Price vs Earnings
For a profitable company like Berkshire Hathaway, the P/E ratio is a useful way to connect what you pay per share to the earnings the business is currently generating. It helps you see how many dollars of price the market is asking for each dollar of earnings today.
What counts as a normal or fair P/E depends on how investors view the company’s growth prospects and risk. Higher expected growth or lower perceived risk usually support a higher P/E, while lower growth or higher risk tend to justify a lower one.
Berkshire Hathaway currently trades on a P/E of 15.26x. That sits below both the Diversified Financial industry average of 17.55x and the broader peer group average of 22.49x. Simply Wall St’s Fair Ratio for Berkshire is 17.60x, which is its proprietary estimate of an appropriate P/E given factors like earnings growth, profit margins, industry, market cap and specific risks.
The Fair Ratio is more tailored than a simple peer or industry comparison because it attempts to adjust for Berkshire’s own profile rather than assuming all companies in the group deserve the same multiple. With the current P/E below the 17.60x Fair Ratio, this approach points to the shares trading at a discount to that fair level.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 18 top founder-led companies .
Upgrade Your Decision Making: Choose your Berkshire Hathaway Narrative
Earlier the article mentioned that there is an even better way to understand valuation, and this is where Narratives come in. Narratives give you a clear story behind the numbers by linking your view on Berkshire Hathaway’s future revenue, earnings and margins to a financial forecast and then to a Fair Value that you can compare with the current price. On Simply Wall St’s Community page, Narratives are an easy tool that millions of investors use to spell out their assumptions and instantly see what those assumptions imply, with each Narrative updating automatically when new earnings, news or other data arrive. For example, one Berkshire Narrative on the platform currently assumes a Fair Value of about US$669,764 per share, while another might sit closer to today’s market price. This shows how two investors can look at the same company, plug in different expectations and reach very different views about whether Berkshire looks attractive, fully priced or expensive at around US$473 per share.
Do you think there's more to the story for Berkshire Hathaway? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice.It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include BRK-B .
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