Is Berkshire Hathaway Still Attractively Priced After Strong 5 Year Share Price Gains?

• If you are wondering whether Berkshire Hathaway is still a smart buy at around $758,000 a share or if the real upside has already been captured, you are not alone in asking whether the current price reflects its true underlying value.
• Despite a modest dip of about 1.3% over the last week, the stock is up 6.4% in the past month, 12.2% year to date, and has delivered a hefty 122.6% over five years, reminding investors why it is often treated as a long term compounder rather than a quick trade.
• Recent headlines have focused on Berkshire’s disciplined capital allocation moves, including its continued share repurchases and incremental portfolio shifts that signal where Warren Buffett and his team still see attractive risk adjusted returns. At the same time, ongoing commentary about its massive cash pile and measured deployment into equities and private deals has fed the debate about how much future growth is already priced in.
• On our framework, Berkshire scores a 4/6 valuation score. This suggests it looks undervalued on most, but not all, of the checks we run. In a moment we will unpack what that means across multiple valuation lenses, before finishing with an even more powerful way to think about what the stock is really worth.

Berkshire Hathaway delivered 8.0% 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 model looks at how much value Berkshire Hathaway creates above the minimum return investors require on its equity, rather than focusing only on near term earnings or cash flows. It starts from the company’s large equity base and asks whether management can keep compounding that capital at attractive rates over time.

On this framework, Berkshire’s Book Value is estimated at $485,274.36 per share, with a Stable EPS of $66,154.88 per share, based on the median return on equity from the past 5 years. The implied Cost of Equity is $38,870.66 per share, so the Excess Return comes out at $27,284.22 per share. That spread is supported by an Average Return on Equity of 12.85% and a Stable Book Value projection of $514,986.06 per share, drawn from weighted estimates by 2 analysts.

Putting these inputs together, the Excess Returns model points to an intrinsic value of about $1,151,293 per share, which in this framework suggests the stock is trading at a discount of roughly 34.2% to the current price.

Result: UNDERVALUED

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 34.2%. Track this in your watchlist or portfolio, or discover 916 more undervalued stocks based on cash flows.

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

Approach 2: Berkshire Hathaway Price vs Earnings

For a consistently profitable business like Berkshire Hathaway, the price to earnings, or PE, ratio is a useful shorthand for how much investors are willing to pay for each dollar of current earnings. It captures both what the market thinks about the durability of those earnings and how optimistic it is about future growth.

In general, faster growing, lower risk companies command higher PE ratios, while slower growing or riskier firms tend to trade on lower multiples. Berkshire currently trades on a PE of about 16.2x, which is slightly above the Diversified Financial industry average of roughly 13.7x, but well below the broader peer group average of around 25.3x. That gap indicates the market is giving Berkshire some credit for quality, but not the kind of premium many financial peers enjoy.

Simply Wall St’s Fair Ratio framework estimates a PE of about 16.9x for Berkshire, based on its earnings growth outlook, margins, risk profile, industry position and market cap. This Fair Ratio is more tailored than a simple peer or industry comparison, because it adjusts for Berkshire’s specific strengths and risks, rather than assuming all financials deserve the same multiple. With the current PE of 16.2x sitting modestly below the 16.9x Fair Ratio, this lens suggests the stock is trading at a slight discount to where it arguably should trade.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Berkshire Hathaway Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Berkshire Hathaway’s story with the numbers behind it. A Narrative is your structured perspective on a company, where you spell out what you believe about its future revenue growth, earnings, margins and risks, and then link that story to a financial forecast and an implied fair value. On Simply Wall St, millions of investors build and share these Narratives on the Community page, making this approach accessible even if you are not a valuation expert. Narratives can be used to compare each Narrative’s Fair Value to the current share price, and they update dynamically as new information like earnings reports or major news is released. For Berkshire, one investor’s Narrative might assume a much higher fair value because they expect faster growth from its operating businesses, while another sees a lower fair value based on slower growth and a preference for holding more cash.

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.

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