Does the Recent Rally Signal More Upside Ahead for Berkshire Hathaway in 2025?

Trying to decide whether to buy, hold, or trim your Berkshire Hathaway stock? You’re definitely not alone. With shares closing at an eye-popping $749,700 and a year-to-date return already at 11.0%, it’s only natural to wonder if the best days are behind it or just getting started. In the past week alone, the stock rose 1.3%, and its five-year run totals an impressive 136.1%. Whether you’ve held for decades or are considering your first slice of Berkshire, recent price moves are hinting at evolving investor sentiment and possible growth ahead.

Much of this optimism can be traced back to Berkshire’s famously resilient business model, its status as a bellwether through changing markets, and the market’s shifting views on risk. This is especially true as investors search for stability in uncertain times. Notably, Berkshire achieves a valuation score of 3 out of 6 using six classic checks for undervaluation, flagging opportunities, but also a few question marks.

Curious how those checks are calculated? The next sections will break down Berkshire Hathaway’s valuation through multiple tried-and-true methods. Stick around, because there’s an even better way to make sense of what the numbers actually mean in today’s investing environment.

Berkshire Hathaway delivered 9.3% returns over the last year. See how this stacks up to the rest of the Diversified Financial industry.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns valuation model focuses on how efficiently a company generates returns above its cost of equity. Instead of projecting future cash flows, this method evaluates Berkshire Hathaway’s ability to leverage its invested capital and produce profits that outperform what investors would expect from an average investment of similar risk.

For Berkshire Hathaway, the average Return on Equity over the past five years is a notable 13.00%. To put the key numbers in perspective:

• Book Value: $464,307.83 per share
• Stable EPS: $64,432.73 per share (based on median return on equity from the past five years)
• Cost of Equity: $37,910.48 per share
• Excess Return: $26,522.25 per share
• Stable Book Value (projection): $495,490.17 per share (from weighted future estimates)

This model estimates an intrinsic value for Berkshire Hathaway’s stock of $1,075,705 per share, which is roughly 30.3% higher than the current price. This suggests the stock is significantly undervalued compared to what its capital efficiencies and earnings power would justify.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Berkshire Hathaway.

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 30.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Berkshire Hathaway Price vs Earnings

For profitable companies like Berkshire Hathaway, the Price-to-Earnings (PE) ratio is a widely accepted valuation metric because it directly ties a company’s value to its ability to generate earnings. This approach helps investors gauge whether a stock is priced reasonably based on its actual profit, making it a popular choice for both value and growth investors.

What constitutes a “normal” or “fair” PE ratio depends on several factors. Higher growth prospects often justify a loftier PE multiple, while greater business risks or unpredictable earnings warrant a lower ratio. Comparing Berkshire’s current PE ratio of 17.1x to the Diversified Financial industry average of 16.8x and its closest peers’ average of 28.0x, Berkshire appears modestly priced given its solid profitability and wide economic moat.

Simply Wall St’s proprietary "Fair Ratio" offers a more tailored benchmark. This metric estimates a fair PE multiple by incorporating not just industry trends but also Berkshire’s earnings growth, profit margins, market capitalization, and underlying risks. Unlike basic peer or industry comparisons, the Fair Ratio recognizes company-specific strengths and vulnerabilities, providing a more holistic and relevant valuation anchor for investors. For Berkshire, the Fair Ratio is 17.1x, which is nearly identical to its current PE ratio of 17.1x. This alignment suggests that the market is pricing Berkshire’s shares about right, taking into account its unique growth, size, and stability characteristics.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Berkshire Hathaway Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, powerful tool that lets you attach your own story, outlook, and assumptions about a company like Berkshire Hathaway directly to your financial forecasts, such as fair value, revenue, earnings, and profit margins. By linking the story behind the business to the numbers that drive its value, Narratives bridge the gap between qualitative insight and quantitative analysis. Narratives are available on Simply Wall St's Community page, where millions of investors build, share, and update these perspectives in real time.

With Narratives, you can easily compare your view of Berkshire’s fair value to the current price, helping you decide if it’s time to buy or sell based on changes in the story, the numbers, or both. Because they update dynamically with every major news release or earnings result, Narratives keep your thinking and valuations current. This ensures you are always making decisions with the freshest information and insights. For example, one Narrative might expect steady management and predict a present fair value near $943,786 per share, while a more conservative view factors in lower growth and reserves a fair value around $604,196 per share; both perspectives shape unique and actionable decisions for real investors.

For Berkshire Hathaway, we'll make it really easy for you with previews of two leading Berkshire Hathaway Narratives:

🐂 Berkshire Hathaway Bull Case

Fair value: $943,786

Current price is 20.6% below narrative fair value

Expected revenue growth rate: 13.0%

• Berkshire Hathaway's robust balance sheet, low debt-to-equity, and massive cash reserves provide a strong financial foundation and flexibility to weather downturns or pursue new investments.
• A disciplined value investing approach and mentorship transition from Warren Buffett to Greg Abel support confidence in future leadership and long-term strategy.
• Net inflation-adjusted share price growth of 12-15% is considered attainable given historical performance, strategic positioning, and adaptability to changing markets.

🐻 Berkshire Hathaway Bear Case

Fair value: $604,196

Current price is 24.0% above narrative fair value

Expected revenue growth rate: 3.6%

• Berkshire's shift to a defensive cash-heavy stance limits upside while protecting from potential economic downturns. This approach signals caution amid uncertain growth prospects.
• The diversified business model and mature core holdings help reduce risk but also limit growth potential, especially as the equity portfolio moves away from large tech positions.
• Concerns include succession uncertainties after Buffett, size constraints that may dampen future outperformance, and sector-specific risks in insurance and energy.

Do you think there's more to the story for Berkshire Hathaway? Create your own Narrative to let the Community know!

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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