The announcement that Warren Buffett will step down as CEO of Berkshire Hathaway by year-end is creating waves in the investing world. With Greg Abel taking over, questions naturally surface about where the company heads next.
See our latest analysis for Berkshire Hathaway.
Berkshire Hathaway’s share price has been relatively resilient amid significant headlines, including Warren Buffett’s decision to pass the reins to Greg Abel and news of record cash holdings. While the stock faced some pressure following the leadership announcement, the 1-year total shareholder return stands at 7.5%. Its longer-term track record remains exceptional, with a 59.5% total return over three years and nearly 119% over five years. After a recent brief pullback, momentum has picked up again, suggesting that investors are weighing both uncertainty and enduring confidence in Berkshire’s unique position and massive cash reserves.
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With Warren Buffett’s transition on the horizon and record cash reserves on hand, investors are left to wonder: Is Berkshire Hathaway trading at a discount that reflects leadership risk, or is the market already pricing in its next chapter of growth?
Berkshire Hathaway’s current share price of $748,320 puts its price-to-earnings (P/E) ratio at 16x, a level that suggests the market is offering Berkshire at a discount to its peer group average of 27x.
The price-to-earnings ratio measures how much investors are willing to pay today for each dollar of earnings the company generates. For Berkshire, this multiple is especially relevant because it blends insurance, rail, utilities, and diverse equity holdings. All of these segments drive consistent profits, even as growth moderates.
At 16x earnings, Berkshire appears attractively valued versus peers. This signals the market still sees it as a high-quality compounder without paying the premium reserved for high-growth pure plays. Compared to a peer group average P/E of 27x, Berkshire is trading at a considerable gap. The company’s ratio is also closely aligned with its estimated fair P/E ratio of 16.9x. This suggests that while the market recognizes Berkshire’s stability, it has not bid up the valuation to excessive levels.
Explore the SWS fair ratio for Berkshire Hathaway
Result: Price-to-Earnings of 16x (UNDERVALUED)
However, slower revenue growth and a recent dip in annual net income highlight challenges that could limit Berkshire Hathaway’s upside in the near term.
Find out about the key risks to this Berkshire Hathaway narrative.
Looking at Berkshire Hathaway from a different angle, our SWS DCF model estimates the company’s fair value at $1,143,071 per share. With the current price well below this figure, the DCF points to significant undervaluation. However, can one model capture the full complexity of Berkshire’s future potential?
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 870 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.
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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.
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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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