DCF Studio

    BRK-B · NYQ · Financial Services

    Berkshire Hathaway Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 847.21

    Market price

    USD 509.77

    Implied upside

    +66.2%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedConsensus rests on as few as 1 analyst estimate(s).
    AdjustedCapital expenditure runs at 5.1% of revenue against depreciation of 3.5%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 847.21+66.2%
    Exit multiple
    USD 832.47+63.3%
    Market price
    USD 509.77

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn64bn128bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 495.0bnUSD 596.9bnUSD 719.8bnUSD 868.0bnUSD 1046.7bn+20.6%
    EBITUSD 74.8bnUSD 90.2bnUSD 108.7bnUSD 131.1bnUSD 158.1bn+20.6%
    NOPATUSD 60.7bnUSD 73.2bnUSD 88.2bnUSD 106.4bnUSD 128.3bn+20.6%
    Add depreciation & amortisationUSD 17.1bnUSD 20.6bnUSD 24.9bnUSD 30.0bnUSD 36.1bn+20.6%
    Less capital expenditureUSD -25.5bnUSD -30.7bnUSD -37.1bnUSD -44.7bnUSD -53.9bn+20.6%
    Less increase in working capitalUSD 8.4bnUSD 10.2bnUSD 12.2bnUSD 14.8bnUSD 17.8bn-20.6%
    Free cashflow to firmUSD 60.7bnUSD 73.2bnUSD 88.3bnUSD 106.4bnUSD 128.4bn+20.6%
    Discount factor0.96000.88470.81530.75140.6925-
    Present valueUSD 58.3bnUSD 64.8bnUSD 72.0bnUSD 80.0bnUSD 88.9bn+11.1%
    Present Value Of The ForecastUSD 363.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.734Reported 0.603, pulled toward 1.0 (Blume)
    Cost of equity9.04%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 1091.3bn89.4% of capital
    Total debtUSD 129.1bn10.6% of capital, book value as a proxy
    Tax rate18.9%Effective, capped at statutory
    WACC8.51%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 847.21

    77% of EV

    Forecast FCFF, final year
    USD 128.4bn
    Capex at depreciation, working capital in reinvestment
    USD 131.7bn
    Less reinvestment at g/ROIC (21.6% of NOPAT)
    USD -28.5bn
    Capitalised
    USD 103.2bn
    ROIC (reported)
    11.6%
    Terminal value, undiscounted
    USD 1761.2bn
    Terminal value, discounted
    USD 1219.6bn
    Enterprise value
    USD 1583.5bn
    Less net debt
    USD -244.2bn
    Equity value
    USD 1827.7bn

    Exit at 8.8x EBITDA

    Value per shareUSD 832.47

    77% of EV

    Terminal value, undiscounted
    USD 1715.2bn
    Terminal value, discounted
    USD 1187.8bn
    Enterprise value
    USD 1551.7bn
    Less net debt
    USD -244.2bn
    Equity value
    USD 1795.9bn

    Spread between methods: 2%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.51%1101.421150.831212.081290.211393.65
    7.51%934.17961.20993.251031.981079.90
    8.51%814.74829.87847.22867.38891.20
    9.51%725.22733.55742.82753.25765.12
    10.51%655.63659.89664.47669.43674.87

    Outlined: this model. Green text: above today's price of 509.77. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year20.6%5.8%-14.8pp
    EBIT margin15.1%8.0%-7.1pp
    Discount rate8.5%14.0%+5.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.