• Wondering whether Berkshire Hathaway stock still offers solid value at its current price, or if the best days are already priced in.
• The stock last closed at US$726,581, with a 1.1% gain over the past week, a slight 0.3% decline over the past month, and returns down 2.4% year to date and 1.1% over the past year, while the 3 and 5 year periods show total returns of 40.7% and 72.8%.
• Recent market attention has focused on Berkshire Hathaway's role as a diversified financial holding company and how its broad portfolio provides exposure to multiple sectors. This context helps explain why the stock's shorter term returns can look different to its longer term record, as investors reassess risk and opportunity across that portfolio.
• On Simply Wall St's 6 point valuation checklist, Berkshire Hathaway currently scores 5 out of 6. This sets up a closer look at how different valuation approaches line up for this stock and hints at an even deeper way to think about value that will be covered at the end of this article.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns model looks at how efficiently Berkshire Hathaway turns shareholder equity into earnings, then compares that to the return investors typically require. The difference between those two is the “excess” value the company is expected to generate over time.

For Berkshire Hathaway, the model uses a Book Value of US$505,559.42 per share and a Stable EPS of US$63,684.58 per share, based on the median return on equity from the past 5 years. Against a Cost of Equity of US$39,872.33 per share, this implies an Excess Return of US$23,812.25 per share and an Average Return on Equity of 11.75%. The Stable Book Value input is US$542,107.44 per share, drawn from weighted future Book Value estimates from 2 analysts.

When these excess returns are projected forward and discounted, the model points to an intrinsic value of about US$1,166,272 per share. Compared with the recent share price of around US$726,581, the Excess Returns approach suggests the stock trades at a 37.7% discount, which screens as materially undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 37.7%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Berkshire Hathaway Price vs Earnings

For a consistently profitable company, the P/E ratio is a useful yardstick because it tells you how much you are paying for each dollar of current earnings. Investors usually accept a higher or lower P/E based on what they expect for future earnings growth and how much risk they see in those earnings.

Berkshire Hathaway currently trades on a P/E of 14.42x. That sits close to the Diversified Financial industry average of 15.23x and below the peer group average of 23.16x. On the surface, that suggests the stock is priced more conservatively than many peers in the same space.

Simply Wall St’s Fair Ratio for Berkshire Hathaway is 17.97x. This is a proprietary estimate of what the P/E could be given the company’s earnings profile, industry, profit margins, market cap and identified risks. Because it incorporates these company specific factors, the Fair Ratio can offer a more tailored reference point than a simple comparison with broad industry or peer averages.

Comparing the current P/E of 14.42x with the Fair Ratio of 17.97x suggests the stock is trading below that tailored reference point.

Result: UNDERVALUED

Wall Street's queuing for one rocket. While SpaceX counts down to its IPO, other companies tied to the new space race are already in orbit. → 20 Compelling Space Companies watchlist · Global Space Race Investing Ideas screener · Scan the sector by valuation on Rocket Lab's valuation page.

Upgrade Your Decision Making: Choose your Berkshire Hathaway Narrative

Earlier the article mentioned that there is an even better way to understand valuation, so Narratives are introduced here as simple stories you choose about Berkshire Hathaway that link your view of its future revenue, earnings and margins to a financial forecast and then to a fair value that you can compare with the current share price.

On Simply Wall St’s Community page, Narratives let you quickly set your own assumptions, see a fair value estimate update in real time as new news or earnings arrive, and then decide whether the gap between that fair value and today’s price is wide enough for you to buy, hold or sell based on your own approach.

For example, one Berkshire Hathaway Narrative on the platform might assume higher revenue growth, resilient margins and a fair value near US$943,786 per share. Another far more cautious Narrative could focus on slower growth and lower margins that produce a meaningfully lower fair value. These different stories sit side by side so you can see how investors with different expectations turn the same company into very different conclusions.

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.