• For readers weighing whether Berkshire Hathaway's current share price still offers value or whether most of the opportunity is already priced in, this article examines what the available numbers indicate about the stock.
• The stock recently closed at US$482.70, with returns of 1.4% over the last week and 1.8% over the last month. Year to date it is down 2.8% and over the last year it is down 6.1%, compared with gains of 46.1% over three years and 67.8% over five years.
• Recent headlines continue to focus on Berkshire Hathaway as a diversified holding company and on how its wide mix of operating businesses and listed investments influences investor sentiment. This steady news flow helps frame the stock's recent price moves as investors weigh its role as a long term compounder alongside shorter term market swings.
• Berkshire currently scores 5 out of 6 on Simply Wall St's valuation checks, indicating a valuation score of 5. The sections ahead compare different valuation approaches and then outline a broader way to think about what this may mean for you as a shareholder or potential investor.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns model looks at how efficiently a company turns shareholder equity into earnings, then compares that to the return investors require. The gap between these two is the “excess return” that can justify a share price above book value.

For Berkshire Hathaway, the model uses a Book Value of $505,559.42 per share and a Stable EPS of $63,684.58 per share, based on the median return on equity from the past 5 years. The implied Cost of Equity is $40,232.93 per share, which leaves an Excess Return of $23,451.65 per share. That is supported by an Average Return on Equity of 11.75% and a Stable Book Value estimate of $542,107.44 per share sourced from two analysts.

Putting this together, the Excess Returns model arrives at an intrinsic value of $764.43 per share. Compared with the recent share price of $482.70, this suggests the stock trades at a 36.9% discount, which indicates that Berkshire Hathaway appears undervalued on this approach.

Result: UNDERVALUED

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 36.9%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.

Approach 2: Berkshire Hathaway Price vs Earnings

For a profitable company, the P/E ratio is a useful way to relate what you pay today to the earnings the business is already generating. It gives you a quick sense of how many dollars of price you are paying for each dollar of current earnings.

What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth outlook and risks. Higher expected growth and lower perceived risk can support a higher P/E, while slower growth or higher risk usually point to a lower P/E.

Berkshire Hathaway currently trades on a P/E of 14.37x. That sits below both the Diversified Financial industry average P/E of 16.90x and a peer group average of 22.57x. Simply Wall St’s Fair Ratio for Berkshire is 17.10x, which is its proprietary estimate of the P/E that would be consistent with the company’s earnings profile, industry, profit margins, market cap and risk factors.

This Fair Ratio can be more useful than a simple comparison with peers or the industry, because it adjusts for company specific drivers rather than assuming all stocks deserve similar multiples. With the current P/E of 14.37x below the Fair Ratio of 17.10x, Berkshire Hathaway is assessed as undervalued on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Berkshire Hathaway Narrative

Earlier it was mentioned that there is an even better way to understand valuation. This is where Narratives come in, giving you a clear story behind the numbers by linking your view of Berkshire Hathaway to specific forecasts for revenue, earnings and margins, and then to a Fair Value that you can compare with the current price on Simply Wall St’s Community page. On this page, Narratives are updated automatically as fresh news or earnings arrive and different investors can, for example, set a higher Fair Value if they see Berkshire as a long term cash compounding anchor, or a lower one if they view it mainly as a cash rich stabiliser that they prefer to hold more cautiously.

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.