Finance
Berkshire Hathaway (BRK.B) Stock Could Be 35% Undervalued As Buybacks Stay In Focus
An Excess Returns model analysis suggests Berkshire Hathaway stock (BRK.B) could be up to 35% undervalued at its current price of $514.95.
Key takeaways
- Berkshire Hathaway stock could be 35% undervalued as buybacks stay in focus
- Management has directed more than US$82 billion into buybacks since mid-2018
- The Excess Returns model estimates Berkshire's intrinsic value is substantially above its current share price of $514.95
- Berkshire's average return on equity is modeled at 11.91% based on the median return over the past 5 years
- Berkshire has taken full control of multifamily lender MF1
An Excess Returns model analysis suggests Berkshire Hathaway stock (BRK.B) could be up to 35% undervalued at its current price of $514.95. The model assumes stable earnings of $65,244.04 per share on a book value of $547,710.90 per share, yielding an average return on equity of 11.91%. This valuation headroom is supported by a massive US$82 billion share buyback program directed by management since mid-2018, which has retired a large amount of stock and increased the per-share economics of remaining holdings. Additionally, Berkshire's capital efficiency is backed by strategic moves including taking full control of multifamily lender MF1, the implied value of its Precision Castparts unit, and a large stake in Alphabet.
The analysis highlights how aggressive buybacks and capital allocation justify Berkshire's valuation headroom.
By the numbers
- 35%
- Estimated amount Berkshire Hathaway stock could be undervalued
- US$82b
- Capital directed into buybacks since mid 2018
- 12.8x
- Berkshire Hathaway's price-to-earnings ratio
- $514.95
- Current share price of Berkshire Hathaway
- 11.91%
- Average return on equity in the model
How it unfolded
- Berkshire Hathaway begins US$82b buyback program
- Coverage highlights buyback program under Greg Abel
Turn stories like this into views
Ravenclip finds the Finance news, makes the video, and posts it before attention moves on.
Common questions
- What happened with Berkshire Hathaway stock?
- Management has directed more than US$82 billion into buybacks since mid-2018
- Where can I read the original report?
- Read the full report at Google News.
