• This article examines whether Berkshire Hathaway is attractively priced right now or whether the recent share levels already reflect its strengths, with a focus on what the current valuation is really indicating.
• Berkshire Hathaway's stock recently closed at US$733,609.77, with returns of 1.0% over the past week, 1.8% over the past month, a decline of 1.4% year to date, and gains of 0.7%, 43.4% and 76.8% over the past 1, 3 and 5 years respectively.
• Recent coverage around Berkshire Hathaway has continued to focus on its role as a diversified financial holding company, its portfolio of operating businesses, and its large equity holdings in major US corporates. These themes provide useful context for thinking about how the market is pricing the stock today and how investors might be weighing its mix of operating earnings and investment assets.
• On Simply Wall St’s valuation checks, Berkshire Hathaway currently records a valuation score of 5 out of 6, which suggests that several different methods point toward the stock being priced below certain benchmarks. The next sections will compare these approaches and then outline a broader way to think about what valuation may indicate for you as a shareholder.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns model for Berkshire Hathaway looks at how much profit the company is expected to earn on its equity above the return that shareholders require, then converts that into an estimated per share value today.

In this framework, Berkshire Hathaway is assessed on 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 $39,992.50 per share, which leaves an Excess Return of $23,692.08 per share after accounting for what shareholders are assumed to require.

The model also uses an Average Return on Equity of 11.75% and a Stable Book Value of $542,107.44 per share, drawn from weighted future book value estimates by 2 analysts. Combining these inputs, Simply Wall St’s Excess Returns model arrives at an estimated intrinsic value of about $1,159,534 per share. Compared with the recent share price of $733,609.77, this implies the stock is 36.7% undervalued based on this method.

Result: UNDERVALUED

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 36.7%. Track this in your watchlist or portfolio, or discover 45 more high quality undervalued stocks.

Approach 2: Berkshire Hathaway Price vs Earnings

For a profitable company like Berkshire Hathaway, the P/E ratio is a straightforward way to see how much you are paying for each dollar of current earnings. Investors typically accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in the business and its sector.

Berkshire Hathaway currently trades on a P/E of 14.56x. That is in line with the Diversified Financial industry average of 14.56x and below a peer group average of 23.90x, which indicates that similar companies are priced at a higher earnings multiple. Simply Wall St also calculates a proprietary Fair Ratio for Berkshire Hathaway of 18.01x, which reflects factors such as its earnings profile, industry, profit margins, market value and risk characteristics.

This Fair Ratio is often more useful than a simple industry or peer comparison because it adjusts for the company’s own fundamentals rather than assuming all diversified financial stocks deserve the same multiple. Comparing the Fair Ratio of 18.01x with the actual P/E of 14.56x suggests Berkshire Hathaway is trading below the level implied by these fundamentals.

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, so Narratives are introduced here as simple stories that you create about Berkshire Hathaway, where you spell out your own assumptions for future revenue, earnings, margins and a fair value, then link that story directly to a financial forecast and a fair value that can be compared with the current share price.

On Simply Wall St, Narratives sit inside the Community page and are designed so any investor can use them, and they update automatically when new information such as news or earnings is added. This means your story about Berkshire Hathaway is not static but continually refreshed against the latest data.

This helps you turn the question “what is this stock worth?” into a concrete decision, because you can compare the Fair Value from your Narrative with the live market Price and then judge for yourself whether that gap is wide enough to justify buying, holding or selling.

For example, one Berkshire Hathaway Narrative on the Community page currently applies a Fair Value of US$943,786 per share while another uses lower assumptions and arrives at a meaningfully lower figure. This shows how different investors, working with the same company, can reach very different conclusions once they set out their own story behind the numbers.

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.