• If you have ever wondered whether Berkshire Hathaway’s share price really reflects what you are getting, you are not alone. This article is designed to help you size up that value for yourself.
• With the Class A shares last closing at US$745,200, investors have seen a 3.5% return over the past week, a 2.3% decline over the last 30 days, and flat returns year to date and over 1 year, while the 3 and 5 year returns sit at 62.7% and 92.9%.
• Recent headlines have continued to focus on Berkshire Hathaway’s role as a bellwether for broad market sentiment and as a holding company with a large portfolio of public and private businesses. That ongoing attention helps frame the recent share price moves as investors reassess what they are willing to pay for a collection of assets that spans multiple sectors and cash flow profiles.
• On our checks, Berkshire Hathaway currently earns a valuation score of 5 out of 6. This suggests it screens as undervalued on most, but not all, of the yardsticks we use. Next, we will walk through those approaches before finishing with a broader way to think about what this score really means for long term investors.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns model looks at how efficiently a company uses shareholders’ equity, then estimates what that performance could be worth in today’s share price. Instead of focusing on short term earnings, it compares the return generated on equity to the cost of that equity.

For Berkshire Hathaway, the model uses a book value of $498,663.02 per share and a stable earnings figure of $66,585.43 per share, based on the median return on equity from the past 5 years. The implied cost of equity is $40,445.49 per share, which leaves an excess return of $26,139.94 per share. That excess comes from an average return on equity of 12.21%, applied to a stable book value estimate of $545,417.94 per share sourced from two analysts’ future book value forecasts.

Putting these inputs together, the Excess Returns model arrives at an intrinsic value of about $1,198,018 per share. Compared with the recent Class A share price of $745,200, this points to the stock trading at a 37.8% discount, which screens as undervalued on this approach.

Result: UNDERVALUED

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 37.8%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Berkshire Hathaway Price vs Earnings

The P/E ratio is a common way to think about valuation for profitable companies, because it links what you pay per share to the earnings generated per share. In simple terms, a higher P/E is usually associated with higher growth expectations or a perception of lower risk, while a lower P/E can be associated with lower expected growth or higher risk.

Berkshire Hathaway currently trades on a P/E of 16.01x. That sits below the Diversified Financial industry average P/E of 17.96x and also below the peer average of 22.89x that we track for this group. On the surface, that indicates investors are paying less for each dollar of Berkshire’s earnings than they are for many comparable companies.

Simply Wall St’s Fair Ratio for Berkshire’s P/E is 17.05x. This is a proprietary estimate of what a “normal” multiple could look like once you factor in the company’s earnings profile, its industry, profit margins, market cap and risk characteristics. Because it pulls those elements together, the Fair Ratio can often be more tailored than a simple comparison with peers or broad industry averages. With the actual P/E of 16.01x sitting below the Fair Ratio of 17.05x, the stock currently screens as undervalued on this metric.

Result: UNDERVALUED

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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. These are simply your story about a company linked to your own numbers. You combine your view of Berkshire Hathaway’s business, plug in your assumptions for future revenue, earnings and margins, turn that into a forecast and a Fair Value, and then compare that Fair Value with the current share price to help you decide whether it looks attractive or not. All of this happens inside Simply Wall St’s Community page where Narratives are available to millions of investors, update automatically as new news or earnings arrive, and can differ widely between users. For example, one Berkshire Narrative on the platform currently puts Fair Value around US$527,845 per Class A share while another sits near US$943,786. This shows how the same company can support very different but clearly quantified views.

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

Fair value: US$943,785.74 per Class A share

Implied discount vs last close: about 21.1% undervalued

Revenue growth assumption: 13.0%

• Frames Berkshire as a financially robust conglomerate with a low debt to equity profile and significant cash reserves that can be used for acquisitions or buybacks.
• Leans on a long standing value investing approach focused on buying solid businesses at attractive prices and continuing that playbook under Greg Abel.
• Assumes healthy long term net inflation growth in the share price, supported by strong fundamentals, a disciplined investment style, and an orderly leadership transition.

Fair value: US$604,196.40 per Class A share

Implied premium vs last close: about 23.4% overvalued

Revenue growth assumption: 3.6%

• Sees Berkshire as a mature, diversified set of mostly non tech businesses where growth is closer to the broader economy and excess returns may be harder to repeat.
• Highlights the large cash and short term securities position as a cautious stance that can protect capital, but also reflects management’s concern about future opportunities and succession risk.
• Projects moderate revenue growth and profit margins, with value creation relying on disciplined capital allocation and buybacks rather than rapid expansion.

If you want to see how other investors are connecting these numbers to their own stories, Curious how numbers become stories that shape markets? Explore Community Narratives and compare where your Berkshire view sits between these bull and bear cases.

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.