Does Berkshire Hathaway Inc’s (NYSE:BRK.A) Past Performance Indicate A Stronger Future?

Examining Berkshire Hathaway Inc’s (NYSE:BRK.A) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess BRK.A’s latest performance announced on 31 March 2018 and compare these figures to its longer term trend and industry movements. Check out our latest analysis for Berkshire Hathaway

Could BRK.A beat the long-term trend and outperform its industry?

I look at data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess different stocks on a more comparable basis, using the most relevant data points. For Berkshire Hathaway, its most recent trailing-twelve-month earnings is US$39.74B, which, relative to last year’s figure, has escalated by a non-trivial 76.28%. Given that these values are relatively nearsighted, I have computed an annualized five-year figure for BRK.A’s earnings, which stands at US$20.36B This means on average, Berkshire Hathaway has been able to increasingly raise its profits over the past few years as well.

NYSE:BRK.A Income Statement Jun 5th 18
NYSE:BRK.A Income Statement Jun 5th 18
How has it been able to do this? Well, let’s take a look at if it is only due to an industry uplift, or if Berkshire Hathaway has seen some company-specific growth. In the last couple of years, Berkshire Hathaway grew its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Looking at growth from a sector-level, the US diversified financial industry has been growing its average earnings by double-digit 14.60% over the past year, and 13.59% over the previous five years. This suggests that whatever tailwind the industry is benefiting from, Berkshire Hathaway is capable of leveraging this to its advantage.

What does this mean?

Though Berkshire Hathaway’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Berkshire Hathaway to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BRK.A’s future growth? Take a look at our free research report of analyst consensus for BRK.A’s outlook.
  2. Financial Health: Is BRK.A’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.