Berkshire Hathaway (BRK.B) Following A Recent Pullback Still Looks Cheap Against Fair Value

Recent Price Moves and Return Profile

Berkshire Hathaway (BRK.B) has seen relatively muted short term price moves, with the stock last closing at US$504.03. One day and past week returns show small declines of 0.19% and 0.06%.

Over the past month the stock is down 1.47%, while the past 3 months show a gain of 6.90%. The year to date return is 1.45%, and the 1 year total return is 0.21%.

Looking further back, Berkshire Hathaway shows a 3 year total return of 39.06% and a 5 year total return of 78.80%. These figures sit alongside a current market value of about US$1.08b.

Berkshire Hathaway’s recent share price pullback over the past month comes after a positive 3 month share price return and a modest year to date share price gain, while the multi year total shareholder returns remain materially higher than the 1 year total shareholder return of 0.21%.

Scan how Berkshire Hathaway’s steady long term record compares with other hand picked compounders in our 74 resilient stocks with low risk scores.

After a modest pullback, Berkshire Hathaway trades below both analyst targets and a wider intrinsic value estimate range. Is the recent price simply noise, or does it hint at a larger discount to fair value?

Price-to-Earnings of 12.6x: Is it justified?

Berkshire Hathaway currently trades on a P/E of 12.6x, which the data classifies as good value relative to both its peers and the wider US diversified financials industry.

The P/E ratio compares the share price to earnings per share and helps you see how much investors are paying for each dollar of current earnings. For a broad conglomerate like Berkshire Hathaway, which operates across insurance, rail, energy, manufacturing, and retail, this measure links directly to the cash generation of its operating businesses.

On Simply Wall St’s checks, Berkshire Hathaway screens as good value on several fronts. Its P/E of 12.6x is lower than the peer average P/E of 23.9x and also below the US diversified financial industry average of 16.9x. In addition, the stock screens as good value when compared to an estimated fair P/E of 16.6x, which indicates a level the market could potentially move toward if sentiment and earnings hold.

That combination, together with Berkshire Hathaway’s classification as trading at 36% below an internal fair value estimate and trading below an estimated future cash flow value of $787.10 per share, points to a market that is pricing its earnings more cautiously than these models imply.

Explore the SWS fair ratio for Berkshire Hathaway

Result: Price-to-Earnings of 12.6x (UNDERVALUED)

However, you still need to factor in risks such as Berkshire Hathaway’s recent net income decline and its exposure to cyclical sectors like freight rail and energy.

Find out about the key risks to this Berkshire Hathaway narrative.

Another View on Berkshire Hathaway’s Value

The P/E comparison suggests Berkshire Hathaway looks inexpensive, yet the SWS DCF model points to an even larger potential gap. At a share price of $504.03, the stock sits 36% below an internal fair value estimate based on projected future cash flows. That frames the discount in starker terms.

That kind of gap can signal opportunity if cash flows prove resilient, or risk if the assumptions behind the DCF prove too optimistic. For an investor weighing Berkshire Hathaway today, the question is which story feels more convincing: the simple earnings multiple, or the deeper cash flow view.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Berkshire Hathaway for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 45 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mix of risks and rewards around Berkshire Hathaway feels finely balanced, it may be useful to act promptly and review the data for yourself using the 3 key rewards and 1 important warning sign.

Looking For More Investment Ideas Beyond Berkshire Hathaway?

If Berkshire Hathaway has your attention, do not stop there. Use this momentum to scan other opportunities that could fit your goals just as well.

• Spot potential value candidates early and review a 45 high quality undervalued stocks that may offer a similar or stronger pricing gap than Berkshire Hathaway.
• Strengthen your income stream by assessing a 12 dividend fortresses that focuses on companies with higher yields and resilient payout histories.
• Build confidence in your downside protection by reviewing a list of solid balance sheet and fundamentals (52 results) that highlights businesses with sturdier financial foundations.

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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