Intrinsic Value Berkshire Hathaway Inc. (BRH.DE)

• Previous Close: €360,000.00
• Intrinsic Value: €286,254.33
• Upside potential: -20%

Stock Valuation Context

Business Model And Market Position

Berkshire Hathaway Inc. operates as a diversified conglomerate with a strong presence in insurance, freight rail transportation, and utilities. The company’s insurance segment, including property, casualty, life, and reinsurance, serves as a core revenue driver, complemented by its ownership of BNSF Railway, a critical North American freight operator. Its utility division, through Berkshire Hathaway Energy, provides diversified energy solutions, leveraging natural gas, renewables, and nuclear sources. Beyond these, the company holds a vast portfolio of manufacturing, retail, and service subsidiaries, ranging from confectionery (See’s Candies) to aerospace components (Precision Castparts). This diversified model mitigates sector-specific risks while capitalizing on long-term cash flows from stable industries. Berkshire’s market position is reinforced by its disciplined capital allocation, led by Warren Buffett, and its ability to acquire undervalued assets with durable competitive advantages. The conglomerate structure allows it to reinvest profits efficiently across high-return businesses, creating a self-sustaining growth cycle. Its brand equity and financial strength further solidify its standing as a leader in the global financial services and industrial sectors.

Revenue Profitability And Efficiency

Berkshire Hathaway reported EUR 424.2 billion in revenue for FY 2024, with net income reaching EUR 89 billion, reflecting robust profitability across its diversified segments. The company’s insurance underwriting and investment income remain key contributors, while its industrial and energy divisions provide steady cash flows. Operating cash flow stood at EUR 30.6 billion, though capital expenditures of EUR 18.9 billion indicate ongoing investments in infrastructure and growth initiatives.

Earnings Power And Capital Efficiency

Diluted EPS of EUR 61,900 underscores Berkshire’s earnings power, driven by its high-margin insurance operations and equity investments. The company’s capital efficiency is evident in its ability to generate substantial returns from its subsidiaries and strategic acquisitions, with minimal reliance on external financing. Its low beta of 0.88 highlights lower volatility relative to the market, appealing to conservative investors.

Balance Sheet And Financial Health

Berkshire maintains a solid balance sheet, with EUR 47.7 billion in cash and equivalents against EUR 124.8 billion in total debt. The company’s conservative leverage ratio and strong liquidity position enable it to weather economic downturns and pursue opportunistic acquisitions. Its insurance float, a key financial resource, provides additional flexibility for investments.

Growth Trends And Dividend Policy

Berkshire’s growth is fueled by organic expansion in its core businesses and strategic acquisitions. The company does not pay dividends, preferring to reinvest earnings into high-return opportunities. This policy aligns with its long-term value creation strategy, though it may limit appeal to income-focused investors.

Valuation And Market Expectations

With a market cap of EUR 548.2 billion, Berkshire trades at a premium, reflecting its diversified earnings streams and leadership in stable industries. Investors likely price in continued disciplined capital allocation and the potential for value-accretive deals under its current management.

Strategic Advantages And Outlook

Berkshire’s strategic advantages include its unparalleled diversification, strong brand, and disciplined capital management. The outlook remains positive, supported by its ability to capitalize on market dislocations and its focus on long-term value creation. However, succession planning and macroeconomic risks pose potential challenges.

Sources

10-K filings, Bloomberg, company reports