BRK.b valuation
Updated
At over 19x forward earnings it would appear BRK.b stock isn't exactly cheap right now. In fact, a fair valuation model (DCF) suggests it could be valued at this price by year end 2020 based on long term earnings growth estimates of 7%.
Looking at earnings estimates for 2019 gives projections for 10.40 EPS. A long term average market multiple of 17x suggests $177 valuation. The 2020 EPS estimate of 11.6 at a market mulitiple of 17x would imply a valuation around 200 by year end 2020.
With no dividend yield investors are not 'getting paid to wait'. Holding this stock is all about making capital gains. Meanwhile the downside volatility doesn't do the long investor any favors.
I'm sure the theory is Berkshire can reinvest earnings better for long term growth rather than returning earnings to shareholders in div yields. But this week Buffett admits he's sitting on billions in idle cash because market valuation has been too high to justify making any new large acquisitions.
What do you think? At 19x forward earnings is BRK.b a good investment right now to buy and hold for the next few years?
Looking at earnings estimates for 2019 gives projections for 10.40 EPS. A long term average market multiple of 17x suggests $177 valuation. The 2020 EPS estimate of 11.6 at a market mulitiple of 17x would imply a valuation around 200 by year end 2020.
With no dividend yield investors are not 'getting paid to wait'. Holding this stock is all about making capital gains. Meanwhile the downside volatility doesn't do the long investor any favors.
I'm sure the theory is Berkshire can reinvest earnings better for long term growth rather than returning earnings to shareholders in div yields. But this week Buffett admits he's sitting on billions in idle cash because market valuation has been too high to justify making any new large acquisitions.
What do you think? At 19x forward earnings is BRK.b a good investment right now to buy and hold for the next few years?
Note
Note that this past year for Berkshire Hathaway its performance lagged far behind the S&P 500 stock market index returning a healthy 12% for the year. Their cash pile grew to a record $128 billion as markets reach record high valuation. Many expect he’s still waiting for another market crash to make an “elephant-sized acquisition" at bargain basement prices.
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