Berkshire Hathaway (BRK.B) quietly keeps doing what it does best, compounding value in the background while the market chases headlines. With the stock grinding higher this year, it is worth unpacking what is driving that steady climb.
See our latest analysis for Berkshire Hathaway.
At around $504.34 per B share, Berkshire’s steady 11.8 percent year to date share price return and five year total shareholder return of 122.77 percent suggest that long term momentum remains firmly intact, even if short term sentiment occasionally wobbles.
If Berkshire’s slow and steady climb appeals to you, it may be worth seeing what else is available by exploring fast growing stocks with high insider ownership.
With shares hovering near record highs yet still trading at a sizable discount to some intrinsic value estimates, investors face a familiar Berkshire dilemma: is this a fresh buying opportunity or is future growth already priced in?
On a last close of $504.34 per B share, Berkshire trades on a 16.1x price to earnings ratio, cheaper than many peers despite its scale and track record.
The price to earnings multiple compares what investors are paying today for each dollar of current earnings. This is a particularly relevant lens for a mature, diversified conglomerate like Berkshire Hathaway. With a five year earnings growth rate of 5.4 percent per year and high quality earnings, the current multiple suggests the market is not extrapolating especially aggressive profit growth from here.
Against direct peers, Berkshire looks attractively priced, with its 16.1x price to earnings ratio sitting well below the peer average of 25.3x. However, within the broader US diversified financials industry, the shares appear more fully valued. They are trading above the 13.6x industry average and only slightly below the estimated fair price to earnings ratio of 16.9x, a level the market could gravitate toward if sentiment or fundamentals shift.
Explore the SWS fair ratio for Berkshire Hathaway
Result: Price to Earnings of 16.1x (UNDERVALUED)
However, Berkshire is not risk free. Slowing earnings growth and a recent net income decline raise questions about how long its valuation gap can persist.
Find out about the key risks to this Berkshire Hathaway narrative.
While the 16.1x price to earnings ratio hints at sensible pricing, our DCF model tells a stronger story. With shares at $504.34 versus an estimated fair value of $768.37, Berkshire screens as materially undervalued, raising the question of whether the market is underestimating its long term cash generation.