Warren Buffett’s decision to step down as CEO of Berkshire Hathaway (BRK.A) at year end, with Greg Abel taking the helm and Buffett remaining as chair, is the real catalyst here.
See our latest analysis for Berkshire Hathaway.
The leadership handover lands after a solid run, with an 11.21% year to date share price return and a powerful five year total shareholder return of 117.69%. This suggests momentum is cooling, but the long term compounding story remains intact.
If Buffett’s cautious stance has you reassessing your own portfolio, this could be a smart moment to explore fast growing stocks with high insider ownership for fresh ideas beyond the blue chip giants.
With the stock near its price target yet trading at a hefty intrinsic discount, investors face a pivotal question: is Berkshire still quietly undervalued, or is the market already baking in Abel era growth?
Berkshire Hathaway trades on a 16x price-to-earnings multiple at a last close of $751245.04, implying a modest premium to the diversified financials industry but still a discount to close peers.
The price-to-earnings multiple compares what investors pay today with the company’s current earnings, a common yardstick for mature, cash generative financial conglomerates. For Berkshire, with diversified insurance, rail and utilities operations, this lens helps gauge how the market values its steady but slowing profit profile.
At 16x, the stock looks expensive versus the broader US diversified financials industry on 13.7x, yet attractive against its peer group average of 26.7x. That premium to the sector but discount to peers hints that investors still assign value to Berkshire’s quality and scale. Our fair price-to-earnings estimate of 16.9x suggests there is only limited room for the market to re rate further from here.
Explore the SWS fair ratio for Berkshire Hathaway
Result: Price-to-Earnings of 16x (ABOUT RIGHT)
However, softer earnings and shrinking net income, along with uncertainty around the leadership transition, could challenge the long term compounding thesis and curb valuation upside.
Find out about the key risks to this Berkshire Hathaway narrative.
Our DCF model paints a very different picture. With Berkshire trading at around $750,560 versus an estimated fair value near $1.15 million, the stock screens roughly 35% undervalued. If earnings stay sluggish, could that gap close through price moves or shifting expectations?
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 906 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
If this outlook does not quite match your own, or you prefer working directly with the raw numbers, you can create a complete view in just a few minutes: Do it your way.
A great starting point for your Berkshire Hathaway research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.
Do not stop with Berkshire when the market is full of opportunities. Use the Simply Wall Street Screener to uncover focused, data driven ideas tailored to your strategy.
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-A.
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