Berkshire Hathaway stock combines a strong 5 year share price gain with valuation checks that still point to meaningful upside, as both an intrinsic value estimate and market multiples suggest the current price leaves room to spare.

• Berkshire Hathaway has returned 76.4% over the past 5 years, which is a solid long run outcome for investors who stayed invested through shorter term ups and downs.
• Under new CEO Greg Abel, recent moves into housing related businesses and a larger Alphabet position can support the long term earnings base. However, the housing exposure and portfolio concentration in a few large holdings may introduce valuation risk if conditions turn against those bets.
• The broader checks lean cheap, with Berkshire Hathaway scoring a high 5 out of 6 on value and both the Excess Returns intrinsic value model and earnings multiples pointing to an undervalued stock.

The issue now is whether Berkshire Hathaway’s current discount to intrinsic value offers enough margin of safety once recent portfolio shifts and stock performance are taken into account.

Spot 46 high quality undervalued stocks that, like Berkshire Hathaway, combine solid long term returns with valuation metrics that still suggest a potential discount to intrinsic value.

Does Berkshire Hathaway Look Undervalued on Excess Returns?

The Excess Returns model values Berkshire Hathaway by comparing the profit it can earn on shareholder equity with the return investors demand. Here Berkshire’s average return on equity of 11.91% feeds into a stable earnings estimate of $65,244.04 per share on a book value base of $522,225.90 per share. With a cost of equity of $41,143.47 per share, the model attributes $24,100.58 per share to returns above that required hurdle, on a stable book value assumption of $547,710.90 per share.

Putting these pieces together, Excess Returns points to an intrinsic value of about $1,179,957 per Berkshire Hathaway share, which is roughly 35.9% above the current market price implied by the model’s discount figure. Because the recent shift toward Alphabet, airlines and housing stocks adds concentration and cycle exposure, the current discount can be read as the market asking for extra compensation for those choices.

On this Excess Returns view, Berkshire Hathaway stock currently appears meaningfully undervalued according to the model’s framework.

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 35.9%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Is Berkshire Hathaway Still Cheap on Earnings?

The P/E ratio fits Berkshire Hathaway well because earnings are a central anchor for a conglomerate with large operating businesses and an equity portfolio. On this measure, Berkshire Hathaway trades on a P/E of about 12.6x. This sits well below the diversified financial industry average of 17.7x and also below the broader peer group average of 24.0x.

The fair P/E ratio implied by the model is 16.5x, which is higher than Berkshire Hathaway’s current 12.6x level. That gap suggests the market is pricing the stock at a discount to what might be expected given its size, mix of businesses and risk profile. This aligns with the indication from the intrinsic value work that the stock is not being priced aggressively today.

On the P/E multiple, Berkshire Hathaway stock currently appears undervalued relative to both its fair value benchmark and sector peers.

The Berkshire Hathaway Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where Berkshire Hathaway’s valuation puzzle leaves off and spell out what future growth, margin and earnings paths would need to look like for the stock to be worth materially more or less than today’s price, based on clear assumptions that live on the Community page. Each narrative connects its figures to a specific view of how Berkshire Hathaway’s growth, profitability and risks might evolve, which you can revisit as new information becomes available.

Be one of the early voices in the Simply Wall St community and set out a number driven narrative on Berkshire Hathaway, giving a clear view on whether moves like the Taylor Morrison deal and the larger Alphabet position ultimately create value for shareholders. Share that thesis now and see how it stacks up as Berkshire Hathaway's results and portfolio decisions unfold over time.

Do you think there's more to the story for Berkshire Hathaway? Head over to our Community to see what others are saying!

The Bottom Line

Berkshire Hathaway screens as undervalued on both the Excess Returns intrinsic value estimate and its current earnings multiple, which point in the same direction. The key question is whether the market is correctly discounting the concentration in a few large holdings and the greater exposure to housing related businesses or being overly cautious. What matters from here is whether those portfolio choices and the core operating earnings stream prove resilient enough for that valuation gap to close rather than turn into a value trap.

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.