Berkshire Hathaway (BRK.B) Stock Stays Cheap As Its 82% Five Year Run
Berkshire Hathaway has delivered an 82.3% total return over the past 5 years, yet several valuation checks still point to the stock trading below an estimate of intrinsic value using an Excess Returns model. For long term holders, that mix of solid historical performance and a still supportive valuation signal raises the question of how much upside may remain in the current price of US$506.03.
- The 82.3% return over 5 years suggests Berkshire Hathaway has rewarded patient shareholders, while still leaving room to ask whether the present price fully reflects its fundamentals.
- A broad, cash generative collection of operating businesses and investments can support the long run earnings power of Berkshire Hathaway. However, any sustained pressure on investment returns or insurance profitability may weigh on what investors are willing to pay.
- The broader checks lean cheap, with the stock screening as undervalued on both earnings based multiples and an Excess Returns intrinsic value estimate. A high value score of 5 out of 6 reinforces that picture.
The issue now is whether Berkshire Hathaway's current market price already reflects the intrinsic value suggested by these models, or if a valuation gap still exists for long term investors.
Scan beyond Berkshire Hathaway and compare its valuation signal to other cash generative compounders using our hand picked list of 47 high quality undervalued stocks.
Is Berkshire Hathaway Still Cheap on Excess Returns?
The Excess Returns model evaluates how much profit Berkshire Hathaway can generate above its estimated cost of equity. For Berkshire Hathaway, the model uses a book value of $522,225.90 per share and a stable earnings figure of $65,244.04 per share, based on the median return on equity over the past 5 years. Against a cost of equity of $41,078.87 per share, this implies an excess return of $24,165.18 per share and an average return on equity of 11.91%.
These assumptions, combined with a stable book value estimate of $547,710.90 per share from two analysts, indicate an Excess Returns intrinsic value of $788.76 per share. Compared with the current share price of $506.03, the model implies that Berkshire Hathaway is 35.8% undervalued within this framework.
On the Excess Returns view, Berkshire Hathaway stock currently appears undervalued relative to its estimated intrinsic value.
Our Excess Returns analysis suggests Berkshire Hathaway is undervalued by 35.8%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Is Berkshire Hathaway a Bargain on Earnings?
The P/E ratio is a useful lens for Berkshire Hathaway because earnings are a central focus for many investors in large, diversified financial companies. At the current price, Berkshire Hathaway trades on a P/E of 12.6x. That sits below both the Diversified Financial industry average of 17.3x and a peer group average of 23.8x, which signals the stock is priced at a discount to many comparable companies on this metric.
A fair P/E multiple that blends Berkshire Hathaway’s sector, size and risk profile is estimated at 16.2x. Set against the current 12.6x, this suggests the market is valuing each dollar of Berkshire Hathaway earnings at a lower level than this tailored benchmark implies. If earnings remain broadly in line with the stable figures used in the Excess Returns work, that gap highlights a difference between the current market P/E and the fair ratio.
On the P/E multiple, Berkshire Hathaway stock currently screens as undervalued relative to both its industry and a tailored fair value benchmark.
See what the numbers say about this price — find out in our valuation breakdown.
The Berkshire Hathaway Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Berkshire Hathaway pick up where the valuation checks leave off and focus on the specific future paths for earnings, margins and growth that could make Berkshire Hathaway's stock worth materially more or less than it is today. Instead of just giving a single figure from a model or ratio, these Narratives set out the future conditions that number relies on so you can monitor whether that picture still holds over time on the Community page.
Add your own narrative on Berkshire Hathaway to present a number-driven view of where its growth, margins and execution may go from here. Share your case with the Simply Wall St community and track how it holds up as new results and information arrive.
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
The Excess Returns intrinsic value work and the earnings multiple comparison both point to Berkshire Hathaway screening as undervalued, with the intrinsic estimate implying a sizeable discount to the current share price. That alignment across methods, supported by a strong overall value profile, suggests the key question is whether the company can keep converting its broad mix of businesses and investments into steady earnings and excess returns. The crux for investors is whether the current discount reflects a genuine opportunity or a cautious view on future investment returns and insurance profitability that proves justified over time.
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.
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