Is Berkshire Hathaway (BRK.B) Still Attractive After Years Of Strong Share Price Gains?
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For investors wondering whether Berkshire Hathaway at around US$500 a share still offers value, or whether most of the opportunity is already priced in, this article focuses squarely on what you are getting for the price you pay.
The stock has been relatively steady in the short term, with a 0.8% decline over the last 7 days, a 1.0% return over 30 days, a 0.6% return year to date, and a 4.1% return over 1 year. The 3 year and 5 year returns sit at 62.2% and 105.3% respectively.
Recent headlines around Berkshire have continued to focus on its role as a large, diversified holding company and the influence of its capital allocation decisions, which often shape how investors think about risk and resilience. Commentary frequently highlights the mix of listed equity holdings and wholly owned operating businesses, providing important context for how the share price behaves over time.
On Simply Wall St’s valuation checks, Berkshire scores 4 out of 6. Next, we look at what different valuation approaches indicate about that score, before finishing with a way to interpret valuation that can be even more useful than any single model.
The Excess Returns model looks at how much value a company creates above the return that shareholders require. Instead of focusing only on earnings or cash flows, it compares Berkshire Hathaway’s return on equity to its cost of equity and capitalizes those excess returns into a per share value.
For Berkshire, the model uses a book value of $485,274.36 per share and a stable EPS of $68,181.36 per share, based on the median return on equity from the past 5 years. The estimated cost of equity is $39,563.49 per share, which implies an excess return of $28,617.86 per share. That excess is supported by an average return on equity of 12.85% and a stable book value estimate of $530,761.30 per share, sourced from weighted future book value estimates from 2 analysts.
When these excess returns are projected and discounted, the model arrives at an intrinsic value of about US$826.13 per share. Compared with the current share price of around US$500, this suggests the stock is about 39.5% undervalued according to this approach.
For a profitable company like Berkshire Hathaway, the P/E ratio is a straightforward way to think about what you are paying for each dollar of current earnings. It condenses many moving parts into a single figure that is easy to compare across time and against other companies.
In practice, a higher P/E usually reflects stronger growth expectations or lower perceived risk, while a lower P/E often goes with more modest growth expectations or higher uncertainty. So the question is less about whether a P/E is high or low in isolation, and more about whether it lines up with what Berkshire is expected to deliver and the risks investors see.
Berkshire’s current P/E is 15.98x. That sits slightly above the Diversified Financial industry average of 15.32x, yet below the peer group average of 23.80x. Simply Wall St’s Fair Ratio for Berkshire is 18.68x, which is the P/E the model suggests based on factors like earnings growth, profit margins, industry, market cap and risk profile. This Fair Ratio can be more informative than a simple comparison with peers or the industry because it adjusts for company specific characteristics. With the current P/E below the 18.68x Fair Ratio, this approach points to Berkshire trading at a lower multiple than the model suggests might be reasonable.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way for you to connect your view of Berkshire Hathaway’s future with the numbers behind its fair value.
A Narrative is your story about the company, where you spell out what you think can happen to revenue, earnings and margins, then link that story directly to a financial forecast and a fair value estimate.
On Simply Wall St, millions of investors use Narratives on the Community page to set their own assumptions, see the fair value that results from those inputs, and then compare that to today’s share price to help inform their decision to buy, hold or sell.
Narratives react to new information such as earnings updates or major news. If fresh data changes your view, your Berkshire Narrative and its fair value update along with it. This means two investors can look at the same stock yet hold very different Narratives and fair values, with one seeing Berkshire as attractive while another sees it as fully priced.
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.
Companies discussed in this article include BRK-B.
