Intrinsic value of Berkshire Hathaway Cl B - BRK-B

Previous Close

$213.25

  Intrinsic Value

$213.26

stock screener

  Rating & Target

hold

0%

Previous close

$213.25

 
Intrinsic value

$213.26

 
Up/down potential

0%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BRK-B stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.00
  2.90
  3.11
  3.30
  3.47
  3.62
  3.76
  3.88
  4.00
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
Revenue, $m
  223,604
  230,089
  237,244
  245,071
  253,573
  262,758
  272,637
  283,226
  294,543
  306,607
  319,443
  333,076
  347,535
  362,851
  379,056
  396,188
  414,285
  433,387
  453,538
  474,786
  497,178
  520,768
  545,609
  571,762
  599,285
  628,246
  658,711
  690,753
  724,447
  759,873
  797,115
Variable operating expenses, $m
 
  191,663
  197,377
  203,626
  210,414
  217,748
  225,636
  234,091
  243,127
  252,760
  263,009
  265,946
  277,490
  289,719
  302,659
  316,337
  330,787
  346,039
  362,129
  379,094
  396,973
  415,808
  435,643
  456,524
  478,501
  501,624
  525,949
  551,533
  578,436
  606,722
  636,458
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  190,860
  191,663
  197,377
  203,626
  210,414
  217,748
  225,636
  234,091
  243,127
  252,760
  263,009
  265,946
  277,490
  289,719
  302,659
  316,337
  330,787
  346,039
  362,129
  379,094
  396,973
  415,808
  435,643
  456,524
  478,501
  501,624
  525,949
  551,533
  578,436
  606,722
  636,458
Operating income, $m
  32,744
  38,425
  39,867
  41,445
  43,158
  45,010
  47,001
  49,135
  51,416
  53,847
  56,434
  67,131
  70,045
  73,132
  76,398
  79,851
  83,498
  87,348
  91,410
  95,692
  100,205
  104,959
  109,966
  115,237
  120,785
  126,621
  132,762
  139,220
  146,011
  153,151
  160,657
EBITDA, $m
  41,645
  52,894
  54,539
  56,339
  58,293
  60,405
  62,676
  65,110
  67,712
  70,485
  73,436
  76,570
  79,894
  83,415
  87,140
  91,079
  95,239
  99,630
  104,263
  109,147
  114,295
  119,718
  125,429
  131,441
  137,768
  144,426
  151,429
  158,795
  166,541
  174,685
  183,246
Interest expense (income), $m
  3,732
  3,982
  4,379
  4,809
  5,280
  5,791
  6,343
  6,936
  7,573
  8,253
  8,978
  9,749
  10,569
  11,438
  12,358
  13,332
  14,362
  15,449
  16,597
  17,808
  19,085
  20,431
  21,849
  23,341
  24,913
  26,567
  28,308
  30,139
  32,064
  34,089
  36,218
Earnings before tax, $m
  33,667
  34,443
  35,488
  36,635
  37,879
  39,219
  40,658
  42,199
  43,843
  45,594
  47,456
  57,381
  59,476
  61,694
  64,040
  66,519
  69,137
  71,899
  74,812
  77,884
  81,120
  84,529
  88,118
  91,896
  95,871
  100,054
  104,454
  109,081
  113,946
  119,062
  124,439
Tax expense, $m
  9,240
  9,300
  9,582
  9,892
  10,227
  10,589
  10,978
  11,394
  11,838
  12,311
  12,813
  15,493
  16,059
  16,657
  17,291
  17,960
  18,667
  19,413
  20,199
  21,029
  21,902
  22,823
  23,792
  24,812
  25,885
  27,015
  28,203
  29,452
  30,766
  32,147
  33,598
Net income, $m
  24,074
  25,144
  25,906
  26,744
  27,651
  28,630
  29,680
  30,805
  32,005
  33,284
  34,643
  41,888
  43,418
  45,037
  46,749
  48,559
  50,470
  52,486
  54,613
  56,855
  59,218
  61,706
  64,326
  67,084
  69,986
  73,040
  76,251
  79,629
  83,181
  86,915
  90,840

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  75,386
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  620,854
  561,192
  578,645
  597,734
  618,470
  640,872
  664,969
  690,796
  718,397
  747,823
  779,130
  812,381
  847,647
  885,002
  924,528
  966,313
  1,010,450
  1,057,041
  1,106,191
  1,158,014
  1,212,629
  1,270,165
  1,330,755
  1,394,540
  1,461,672
  1,532,307
  1,606,612
  1,684,763
  1,766,944
  1,853,349
  1,944,183
Adjusted assets (=assets-cash), $m
  545,468
  561,192
  578,645
  597,734
  618,470
  640,872
  664,969
  690,796
  718,397
  747,823
  779,130
  812,381
  847,647
  885,002
  924,528
  966,313
  1,010,450
  1,057,041
  1,106,191
  1,158,014
  1,212,629
  1,270,165
  1,330,755
  1,394,540
  1,461,672
  1,532,307
  1,606,612
  1,684,763
  1,766,944
  1,853,349
  1,944,183
Revenue / Adjusted assets
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
  0.410
Average production assets, $m
  175,485
  180,619
  186,237
  192,381
  199,055
  206,265
  214,020
  222,333
  231,216
  240,687
  250,763
  261,465
  272,815
  284,838
  297,559
  311,008
  325,213
  340,209
  356,028
  372,707
  390,285
  408,803
  428,303
  448,833
  470,439
  493,173
  517,088
  542,241
  568,691
  596,500
  625,735
Working capital, $m
  0
  -75,469
  -77,816
  -80,383
  -83,172
  -86,184
  -89,425
  -92,898
  -96,610
  -100,567
  -104,777
  -109,249
  -113,992
  -119,015
  -124,331
  -129,950
  -135,885
  -142,151
  -148,761
  -155,730
  -163,074
  -170,812
  -178,960
  -187,538
  -196,566
  -206,065
  -216,057
  -226,567
  -237,619
  -249,238
  -261,454
Total debt, $m
  101,644
  109,485
  120,236
  131,995
  144,769
  158,568
  173,412
  189,321
  206,324
  224,450
  243,735
  264,218
  285,942
  308,952
  333,300
  359,040
  386,228
  414,928
  445,205
  477,127
  510,771
  546,213
  583,536
  622,828
  664,181
  707,692
  753,464
  801,605
  852,228
  905,454
  961,408
Total liabilities, $m
  337,853
  345,694
  356,445
  368,204
  380,978
  394,777
  409,621
  425,530
  442,533
  460,659
  479,944
  500,427
  522,151
  545,161
  569,509
  595,249
  622,437
  651,137
  681,414
  713,336
  746,980
  782,422
  819,745
  859,037
  900,390
  943,901
  989,673
  1,037,814
  1,088,437
  1,141,663
  1,197,617
Total equity, $m
  283,001
  215,498
  222,200
  229,530
  237,492
  246,095
  255,348
  265,266
  275,865
  287,164
  299,186
  311,954
  325,496
  339,841
  355,019
  371,064
  388,013
  405,904
  424,777
  444,677
  465,650
  487,743
  511,010
  535,503
  561,282
  588,406
  616,939
  646,949
  678,506
  711,686
  746,566
Total liabilities and equity, $m
  620,854
  561,192
  578,645
  597,734
  618,470
  640,872
  664,969
  690,796
  718,398
  747,823
  779,130
  812,381
  847,647
  885,002
  924,528
  966,313
  1,010,450
  1,057,041
  1,106,191
  1,158,013
  1,212,630
  1,270,165
  1,330,755
  1,394,540
  1,461,672
  1,532,307
  1,606,612
  1,684,763
  1,766,943
  1,853,349
  1,944,183
Debt-to-equity ratio
  0.359
  0.510
  0.540
  0.580
  0.610
  0.640
  0.680
  0.710
  0.750
  0.780
  0.810
  0.850
  0.880
  0.910
  0.940
  0.970
  1.000
  1.020
  1.050
  1.070
  1.100
  1.120
  1.140
  1.160
  1.180
  1.200
  1.220
  1.240
  1.260
  1.270
  1.290
Adjusted equity ratio
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384
  0.384

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  24,074
  25,144
  25,906
  26,744
  27,651
  28,630
  29,680
  30,805
  32,005
  33,284
  34,643
  41,888
  43,418
  45,037
  46,749
  48,559
  50,470
  52,486
  54,613
  56,855
  59,218
  61,706
  64,326
  67,084
  69,986
  73,040
  76,251
  79,629
  83,181
  86,915
  90,840
Depreciation, amort., depletion, $m
  8,901
  14,469
  14,672
  14,894
  15,135
  15,395
  15,675
  15,975
  16,296
  16,638
  17,001
  9,439
  9,849
  10,283
  10,742
  11,228
  11,741
  12,282
  12,853
  13,455
  14,090
  14,758
  15,462
  16,203
  16,983
  17,804
  18,667
  19,575
  20,530
  21,534
  22,590
Funds from operations, $m
  39,456
  39,613
  40,578
  41,638
  42,786
  44,025
  45,355
  46,780
  48,301
  49,922
  51,645
  51,328
  53,267
  55,320
  57,491
  59,786
  62,210
  64,768
  67,466
  70,310
  73,307
  76,464
  79,788
  83,287
  86,970
  90,844
  94,919
  99,205
  103,711
  108,449
  113,430
Change in working capital, $m
  6,921
  -2,127
  -2,347
  -2,567
  -2,789
  -3,013
  -3,241
  -3,473
  -3,712
  -3,957
  -4,210
  -4,472
  -4,742
  -5,023
  -5,315
  -5,619
  -5,936
  -6,265
  -6,610
  -6,969
  -7,345
  -7,737
  -8,148
  -8,578
  -9,028
  -9,499
  -9,993
  -10,510
  -11,052
  -11,620
  -12,215
Cash from operations, $m
  32,535
  41,740
  42,925
  44,205
  45,575
  47,037
  48,596
  50,253
  52,013
  53,879
  55,855
  55,799
  58,009
  60,343
  62,807
  65,406
  68,146
  71,034
  74,076
  77,279
  80,652
  84,202
  87,936
  91,865
  95,997
  100,343
  104,911
  109,714
  114,763
  120,069
  125,645
Maintenance CAPEX, $m
  0
  -6,335
  -6,521
  -6,723
  -6,945
  -7,186
  -7,446
  -7,726
  -8,026
  -8,347
  -8,689
  -9,053
  -9,439
  -9,849
  -10,283
  -10,742
  -11,228
  -11,741
  -12,282
  -12,853
  -13,455
  -14,090
  -14,758
  -15,462
  -16,203
  -16,983
  -17,804
  -18,667
  -19,575
  -20,530
  -21,534
New CAPEX, $m
  -12,954
  -5,134
  -5,617
  -6,144
  -6,674
  -7,210
  -7,755
  -8,312
  -8,883
  -9,471
  -10,076
  -10,702
  -11,350
  -12,023
  -12,721
  -13,448
  -14,206
  -14,995
  -15,819
  -16,679
  -17,578
  -18,518
  -19,501
  -20,529
  -21,606
  -22,734
  -23,915
  -25,153
  -26,450
  -27,810
  -29,235
Cash from investing activities, $m
  -84,267
  -11,469
  -12,138
  -12,867
  -13,619
  -14,396
  -15,201
  -16,038
  -16,909
  -17,818
  -18,765
  -19,755
  -20,789
  -21,872
  -23,004
  -24,190
  -25,434
  -26,736
  -28,101
  -29,532
  -31,033
  -32,608
  -34,259
  -35,991
  -37,809
  -39,717
  -41,719
  -43,820
  -46,025
  -48,340
  -50,769
Free cash flow, $m
  -51,732
  30,270
  30,787
  31,337
  31,956
  32,641
  33,394
  34,214
  35,103
  36,061
  37,090
  36,044
  37,220
  38,472
  39,802
  41,215
  42,712
  44,298
  45,975
  47,747
  49,619
  51,594
  53,677
  55,874
  58,188
  60,625
  63,192
  65,894
  68,738
  71,729
  74,876
Issuance/(repayment) of debt, $m
  12,679
  9,935
  10,751
  11,759
  12,773
  13,800
  14,844
  15,910
  17,002
  18,126
  19,285
  20,483
  21,724
  23,011
  24,348
  25,739
  27,189
  28,700
  30,276
  31,923
  33,643
  35,442
  37,323
  39,292
  41,353
  43,511
  45,772
  48,141
  50,623
  53,226
  55,954
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  12,791
  9,935
  10,751
  11,759
  12,773
  13,800
  14,844
  15,910
  17,002
  18,126
  19,285
  20,483
  21,724
  23,011
  24,348
  25,739
  27,189
  28,700
  30,276
  31,923
  33,643
  35,442
  37,323
  39,292
  41,353
  43,511
  45,772
  48,141
  50,623
  53,226
  55,954
Total cash flow (excl. dividends), $m
  -39,113
  40,205
  41,539
  43,097
  44,729
  46,441
  48,237
  50,124
  52,105
  54,187
  56,375
  56,527
  58,943
  61,482
  64,150
  66,954
  69,901
  72,998
  76,251
  79,670
  83,262
  87,036
  91,001
  95,166
  99,541
  104,137
  108,964
  114,035
  119,361
  124,955
  130,830
Retained Cash Flow (-), $m
  -27,451
  -5,789
  -6,702
  -7,330
  -7,963
  -8,602
  -9,253
  -9,918
  -10,599
  -11,299
  -12,022
  -12,769
  -13,542
  -14,344
  -15,178
  -16,045
  -16,949
  -17,891
  -18,874
  -19,900
  -20,972
  -22,094
  -23,266
  -24,494
  -25,778
  -27,124
  -28,533
  -30,010
  -31,557
  -33,180
  -34,880
Prev. year cash balance distribution, $m
 
  73,292
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  107,708
  34,837
  35,766
  36,766
  37,838
  38,984
  40,206
  41,507
  42,888
  44,353
  43,759
  45,401
  47,138
  48,972
  50,909
  52,952
  55,107
  57,378
  59,770
  62,290
  64,942
  67,734
  70,672
  73,762
  77,013
  80,431
  84,025
  87,803
  91,775
  95,949
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  103,268
  31,892
  31,126
  30,273
  29,329
  28,293
  27,163
  25,943
  24,637
  23,252
  20,780
  19,374
  17,923
  16,441
  14,946
  13,456
  11,990
  10,567
  9,203
  7,915
  6,717
  5,620
  4,632
  3,757
  2,996
  2,347
  1,803
  1,358
  1,002
  722
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in various business activities. Its segments include Insurance, such as GEICO, Berkshire Hathaway Primary Group, General Re Corporation and Berkshire Hathaway Reinsurance Group; Burlington Northern Santa Fe, LLC, which is engaged in the operation of the railroad system; Berkshire Hathaway Energy, which includes regulated electric and gas utility; Manufacturing, which includes manufacturers of various products, including industrial, consumer and building products; McLane Company, which is engaged in the wholesale distribution of groceries and non-food items; Service and retailing, which includes providers of various services, including fractional aircraft ownership programs, aviation pilot training and various retailing businesses, and Finance and financial products, which includes manufactured housing and related consumer financing, transportation equipment, manufacturing and leasing, and furniture leasing.

FINANCIAL RATIOS  of  Berkshire Hathaway Cl B (BRK-B)

Valuation Ratios
P/E Ratio 0
Price to Sales 0
Price to Book 0
Price to Tangible Book
Price to Cash Flow 0
Price to Free Cash Flow 0
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -19.5%
Cap. Spend. - 3 Yr. Gr. Rate 3.2%
Financial Strength
Quick Ratio 36
Current Ratio NaN
LT Debt to Equity 35.2%
Total Debt to Equity 35.9%
Interest Coverage 10
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 6.6%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 8.9%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 24.4%
Gross Margin - 3 Yr. Avg. 24.4%
EBITDA Margin 20.7%
EBITDA Margin - 3 Yr. Avg. 20.8%
Operating Margin 14.6%
Oper. Margin - 3 Yr. Avg. 15.2%
Pre-Tax Margin 15.1%
Pre-Tax Margin - 3 Yr. Avg. 15.4%
Net Profit Margin 10.8%
Net Profit Margin - 3 Yr. Avg. 10.8%
Effective Tax Rate 27.4%
Eff/ Tax Rate - 3 Yr. Avg. 28.6%
Payout Ratio 0%

BRK-B stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BRK-B stock intrinsic value calculation we used $223604 million for the last fiscal year's total revenue generated by Berkshire Hathaway Cl B. The default revenue input number comes from 2016 income statement of Berkshire Hathaway Cl B. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BRK-B stock valuation model: a) initial revenue growth rate of 2.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for BRK-B is calculated based on our internal credit rating of Berkshire Hathaway Cl B, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Berkshire Hathaway Cl B.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BRK-B stock the variable cost ratio is equal to 83.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BRK-B stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4% for Berkshire Hathaway Cl B.

Corporate tax rate of 27% is the nominal tax rate for Berkshire Hathaway Cl B. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BRK-B stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BRK-B are equal to 78.5%.

Life of production assets of 27.7 years is the average useful life of capital assets used in Berkshire Hathaway Cl B operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BRK-B is equal to -32.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $283001 million for Berkshire Hathaway Cl B - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 2486.23 million for Berkshire Hathaway Cl B is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Berkshire Hathaway Cl B at the current share price and the inputted number of shares is $530.2 billion.

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Financial statements of BRK-B
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