Berkshire Hathaway (BRK.A): Assessing Valuation as Record Q3 Earnings Expected on Light Hurricane Season

Berkshire Hathaway (BRK.A) is grabbing attention as analysts anticipate record third-quarter operating earnings. The outlook is being driven by a lighter-than-usual hurricane season and fewer insured catastrophe losses, which is boosting investor sentiment on the insurance front.

See our latest analysis for Berkshire Hathaway.

Berkshire Hathaway’s share price momentum has been steady this year, with a year-to-date gain of 9.3% and a solid one-year total shareholder return of 5.7%. While Warren Buffett’s recent decision to trim major holdings like Apple and Bank of America reflects a more cautious stance given valuations, the company itself continues to outperform sector peers in earnings, supported by resilient insurance results and positive investor sentiment.

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With the stock not far from analyst price targets and trading at historically resilient levels, the big question is whether Berkshire Hathaway shares remain undervalued or if the market already reflects all the company’s future growth potential.

Preferred Multiple of 100% Higher Risk Funding: Is it justified?

Berkshire Hathaway’s financial structure stands out because 100% of its liabilities are funded through higher risk sources rather than customer deposits. This setup is unique among diversified financials and shapes how investors think about value and risk.

The preferred multiple in this context highlights that Berkshire Hathaway does not rely on traditional, low-risk funding sources such as deposits. Instead, the company’s liabilities are entirely made up of external borrowing, a model generally seen as riskier in the sector. This is crucial for investors, as the cost and stability of funding can impact both valuation and resilience in challenging market environments.

Compared to peers that benefit from a mix of deposit funding and external debt, Berkshire Hathaway’s approach could imply higher sensitivity to credit conditions and interest rate movements. It suggests that the market may be wary of granting the company the same valuation multiples as more conservatively funded financial institutions. However, it also signals confidence in the firm’s ability to manage such a structure through scale, diversification, and prudent risk management.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Preferred multiple of 100% higher risk funding (ABOUT RIGHT)

However, slower net income growth and sensitivity to shifts in credit conditions remain important risks that could challenge the current valuation momentum of Berkshire Hathaway.

Find out about the key risks to this Berkshire Hathaway narrative.

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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.

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