• If you are wondering whether Berkshire Hathaway is attractively priced or already fully valued, the recent share performance gives a useful starting point but not the full story.
• The stock last closed at US$489.46, with returns of 0.8% over the past week, 1.9% over the past month, a decline of 1.5% year to date, 0.9% over the past year, 45.3% over three years, and 77.7% over five years.
• Recent coverage around Berkshire Hathaway has focused on how the stock fits into long term portfolios and how investors view its broad collection of operating businesses and investments. This context helps frame the current share price as part of a longer story rather than a short term trading move.
• Based on Simply Wall St's valuation checks, Berkshire Hathaway has a value score of 5 out of 6. This sets up a closer look at different valuation methods and a broader way to think about what the stock might be worth by the end of this article.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns model looks at how efficiently Berkshire Hathaway turns shareholder capital into profits, then compares those returns with the cost of equity. Instead of focusing on short term earnings swings, it asks whether the company earns more on its equity than investors require as compensation for risk.

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 Cost of Equity is estimated at $39,992.50 per share, which implies an Excess Return of $23,692.08 per share. The Average Return on Equity is 11.75%, and the Stable Book Value is projected at $542,107.44 per share, using weighted future book value estimates from 2 analysts.

These inputs are combined to arrive at an intrinsic value per share. In this case, the analysis suggests that the stock is trading at a 36.7% discount to the Excess Returns valuation. On this model, Berkshire Hathaway stock screens as undervalued relative to its implied economic returns.

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 useful yardstick because it links what you pay for each share to the earnings that support that price. In general, higher growth expectations or lower perceived risk can support a higher P/E, while slower growth or higher risk usually call for a lower, more conservative P/E.

Berkshire Hathaway currently trades on a P/E of 14.56x. This sits in line with the Diversified Financial industry average of 14.56x and below the broader peer group average of 23.90x. Simply Wall St also calculates a proprietary “Fair Ratio” of 18.06x for Berkshire Hathaway, which is the P/E level suggested by its earnings profile, industry, margins, size and risk characteristics.

This Fair Ratio goes further than a simple comparison with peers or the industry, because it attempts to adjust for company specific factors such as profit margins, growth outlook and market capitalization rather than assuming all stocks deserve the same multiple. Comparing the Fair Ratio of 18.06x with the actual P/E of 14.56x suggests Berkshire Hathaway trades at a discount to this tailored benchmark.

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: a simple way to link your story about Berkshire Hathaway to the numbers you think are reasonable for its future revenue, earnings, margins and fair value.

A Narrative is your structured view of the company. You connect what Berkshire Hathaway is, how it operates and how you expect it to develop, to a financial forecast and then to a fair value estimate that can be compared with today’s share price.

On Simply Wall St, Narratives sit within the Community page and are designed to be easy to use. You can see how your assumptions translate into a Fair Value, compare that to the current Price to help decide whether the stock looks attractive or expensive for you, and then have that view update automatically when new information like news or earnings is added.

For example, one Berkshire Hathaway Narrative on the platform currently estimates fair value at US$669,764.35 per share. Another investor might apply far more conservative assumptions, showing how the same stock can support very different yet clearly explained views.

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.