• If you are wondering whether Berkshire Hathaway's current share price still reflects its long term appeal, the key question is how its underlying value compares with what the market is paying today.
• Over the past week the stock is up 0.7%, over the last month it is up 3.7%, yet year to date it is down 2.1% and over the last year it is down 3.4%, while the 3 year and 5 year returns sit at 49.7% and 67.1% respectively.
• Recent coverage has focused on Berkshire Hathaway's role as a diversified financial holding company and how its broad portfolio of operating businesses and listed equities shapes sentiment around the stock. This context helps explain why even modest short term price moves can draw attention from investors who track both the operating businesses and the investment portfolio together.
• On Simply Wall St's valuation model, Berkshire Hathaway records a value score of 5 out of 6. This sets up a closer look at how different valuation approaches line up today and points to an even deeper way of thinking 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 much profit a company can generate above its estimated cost of equity, then capitalizes those surplus returns to estimate what the stock could be worth today.

For Berkshire Hathaway, the model uses a book value of $505,559.42 per share and a stable earnings per share estimate of $63,684.58, based on the median return on equity from the past 5 years. The average return on equity is 11.75%, while the cost of equity is $40,206.07 per share. The difference between these, the excess return, is $23,478.51 per share.

The analysis also relies on a stable book value estimate of $542,107.44 per share, sourced from weighted future book value estimates provided by 2 analysts. These inputs are combined to generate an intrinsic value from the Excess Returns model of $1,147,750.46 per share.

Compared with the current market price, this intrinsic value implies the stock is 36.5% undervalued based on this framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 36.5%. Track this in your watchlist or portfolio, or discover 49 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 way to relate what you pay for the stock to the earnings it currently generates. Investors usually accept a higher P/E when they expect stronger earnings growth or perceive lower risk, and a lower P/E when growth expectations are weaker or risks feel higher.

Berkshire Hathaway currently trades on a P/E of 14.46x. That sits below both the Diversified Financial industry average P/E of 17.90x and the peer average of 23.11x. Simply Wall St also calculates a proprietary “Fair Ratio” of 17.04x for Berkshire Hathaway, which is the P/E level that would typically line up with its earnings profile, industry, profit margins, market cap and risk factors.

This Fair Ratio can be more informative than a simple comparison with peers or the broad industry, because it is tailored to Berkshire Hathaway’s specific characteristics rather than applying a one size fits all benchmark. Comparing the Fair Ratio of 17.04x with the actual P/E of 14.46x suggests the stock trades below the level implied by that framework.

Result: UNDERVALUED

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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 a simple way for you to attach your own story about Berkshire Hathaway to the numbers you see, by linking a view on its future revenue, earnings and margins to a financial forecast and then to 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 you can pick or build a clear thesis. For example, one investor may have a cautious Berkshire Hathaway Narrative that leans on a fair value closer to US$527,846 per share. Another may choose a more optimistic Narrative that points to a fair value around US$1,403,573 per share. As new news, earnings or balance sheet data are added, these Narratives refresh automatically so your decision process around whether the stock looks expensive or cheap against your chosen fair value stays current without extra work from you.

For Berkshire Hathaway however we will make it really easy for you with previews of two leading Berkshire Hathaway Narratives:

Fair value: US$943,785.74 per BRK.A share

Implied pricing gap: the last close of US$728,641.00 sits about 22.8% below this fair value estimate

Revenue growth assumption: 13%

• Frames Berkshire Hathaway as a financially resilient conglomerate with a low debt to equity profile and substantial cash reserves that can be used for acquisitions, internal investment or buybacks.
• Emphasizes a disciplined value investing approach and the role of Warren Buffett's mentorship of Greg Abel in supporting continuity of the capital allocation playbook.
• Argues that, based on past resilience in challenging conditions and the current balance sheet, long term holders could see share price gains that exceed inflation if similar conditions persist.

Fair value: US$604,196.40 per BRK.A share

Implied pricing gap: the last close of US$728,641.00 sits about 20.6% above this fair value estimate

Revenue growth assumption: 3.6%

• Highlights that many Berkshire Hathaway operating businesses are mature, with growth expectations that broadly track the wider economy and leave less room for earnings acceleration.
• Points out that the company is holding a large cash and Treasury bill position, which can lower risk but may cap returns if equity markets or operating earnings grow faster than cash yields.
• Flags several risks, including succession from Warren Buffett to Greg Abel, potential limits from the size of the portfolio, and regulatory or policy changes that could affect insurance and energy exposures.

Both Narratives use the same business facts but land in very different places on fair value. This is exactly the point of this framework. The next step is to decide which story fits your own expectations for Berkshire Hathaway and how that lines up with the current share price, then monitor how that thesis holds up as new data arrives through earnings, balance sheet updates and market moves. To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Berkshire Hathaway on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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.