Berkshire Hathaway (BRK.B): Rethinking Valuation After a Steady Year-to-Date Share Price Climb

Berkshire Hathaway (BRK.B) has been quietly grinding higher this month, and that steady move tells you more than any headline. Investors are weighing its valuation against a decade of disciplined capital allocation.

See our latest analysis for Berkshire Hathaway.

Zooming out, that steady climb sits on top of an 11.6% year to date share price return. A 5 year total shareholder return of 121.4% shows long term compounding momentum remains firmly intact.

If Berkshire’s pace has you rethinking your watchlist, this is a good moment to explore fast growing stocks with high insider ownership as potential next wave candidates.

With shares hovering just below analyst targets yet still trading at a sizeable estimated intrinsic discount, the real question is whether Berkshire is quietly undervalued or whether the market has already priced in its next decade of growth.

Price to Earnings of 16.2x: Is it justified?

Berkshire Hathaway trades on a 16.2x price to earnings multiple at a last close of $503.60, a slight premium to its diversified financials peers but below close comparables.

The price to earnings ratio compares what investors pay today for each dollar of current earnings, a key lens for a mature, profit generating conglomerate like Berkshire.

At 16.2x, the stock screens more expensive than the broader US diversified financials industry on 13.7x. It sits meaningfully below a 25.3x peer average and close to our estimated fair P E level of 16.9x, suggesting the market is only paying a modest premium for Berkshire’s earnings profile.

Relative to the sector, that higher multiple signals investors are willing to pay up for Berkshire’s diversified earnings and capital allocation track record. The tight gap versus our fair ratio implies limited froth and room for the valuation to gravitate toward that fair P E anchor if fundamentals hold.

Explore the SWS fair ratio for Berkshire Hathaway

Result: Price-to-earnings of 16.2x (ABOUT RIGHT)

However, slowing earnings growth and recent one year underperformance versus longer term returns could challenge the case that Berkshire’s current multiple still offers upside.

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

Another way to look at value

Our DCF model paints a different picture, suggesting Berkshire’s fair value sits near $764.90, roughly 34% above the current $503.60 share price. That points to a stock the market may be underpaying for today. However, how much faith should investors put in long range cash flow assumptions?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Berkshire Hathaway for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 917 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Berkshire Hathaway Narrative

If this perspective does not fully align with your own, use the data, test your assumptions, and build a personalized narrative in minutes: Do it your way.

A great starting point for your Berkshire Hathaway research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

Looking for your next smart move?

Do not stop at Berkshire when you could be lining up tomorrow’s winners today. Use the Simply Wall Street Screener now to uncover targeted opportunities.

• Capture potential value before the crowd by scanning these 917 undervalued stocks based on cash flows that the market may be overlooking despite strong underlying cash flows.
• Position yourself early in structural growth by focusing on these 30 healthcare AI stocks transforming patient outcomes and reshaping the future of medicine.
• Boost your income strategy by targeting these 14 dividend stocks with yields > 3% that combine reliable payouts with resilient business models.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com