• If you are wondering whether Berkshire Hathaway stock at around US$486 per share still offers value, the answer depends on how you look at what the market is currently pricing in.
• The stock has edged up 0.8% over the last week and 4.5% over the last month, while being down 2.1% year to date and down 3.4% over the past year, set against a 3 year return of 51.7% and a 5 year return of 68.0%.
• Recent coverage has focused on Berkshire Hathaway's role as a diversified financial conglomerate and on how its broad mix of operating businesses and listed holdings shapes market sentiment around the stock. This context helps explain why shorter term moves can look very different from its multi year track record, and why investors often watch both company specific headlines and wider market headlines when thinking about value.
• Berkshire Hathaway currently holds a valuation score of 5/6. This sets up a closer look at traditional valuation tools like P/E, P/B and discounted cash flow, as well as an alternative way to think about fair value that will come at the end of this article.

Approach 1: Berkshire Hathaway Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn over and above the return that investors typically require on its equity, then capitalizes those extra profits into an estimate of fair value.

For Berkshire Hathaway, the model starts with 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 $40,206.07 per share, which leaves an Excess Return of $23,478.51 per share. That excess is supported by an Average Return on Equity of 11.75% and a Stable Book Value of $542,107.44 per share, based on weighted future book value estimates from 2 analysts.

These inputs are combined to produce an intrinsic value of about $766.14 per share using the Excess Returns Model. Compared with the current share price of about $486, this implies the stock trades at roughly a 36.5% discount, which the model interprets as undervaluation.

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 shorthand for how much investors are paying for each dollar of earnings. It ties the share price directly to current profits, which many investors use as a quick gauge of value.

What counts as a "normal" or "fair" P/E often reflects how the market views a stock's growth potential and risk. Higher expected growth or lower perceived risk can support a higher multiple, while lower growth or higher risk usually points to a lower one.

Berkshire Hathaway currently trades on a P/E of 14.46x. That sits below the Diversified Financial industry average of 17.90x and below the peer group average of 23.11x. Simply Wall St's Fair Ratio for Berkshire Hathaway is 17.11x. This Fair Ratio is a proprietary estimate of the P/E the stock might attract given its earnings profile, industry, profit margins, market cap and specific risks, which can be more tailored than a simple comparison with broad industry or peer averages.

Since the current P/E of 14.46x is below the Fair Ratio of 17.11x, the multiple suggests the stock is trading at a discount on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Berkshire Hathaway Narrative

Earlier we mentioned that there is an even better way to understand valuation. Meet Narratives, a simple way to connect your view of Berkshire Hathaway's story with your assumptions for future revenue, earnings and margins, then link that to a fair value that you can compare with the current share price on Simply Wall St's Community page. Narratives, including one that values the stock at about US$669,764.35 per share, update automatically as new news or earnings arrive. This can help investors who see Berkshire mainly as a cash rich, diversified financial conglomerate, and those who view it as a defensive anchor alongside growth stocks, reach different, clearly quantified decisions about whether the stock looks attractive or not at today's price.

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.