Comparing BRK B Financials with Competitors

Comparing BRK.B Financials with Competitors

You’ve likely heard of Warren Buffett, the ‘Oracle of Omaha,’ whose thoughts on finance carry immense weight. But what about his actual company, Berkshire Hathaway? For many people, trying to decide if BRK.B is a good long-term investment feels like a job for Wall Street experts.

Does looking at a stock quote feel like trying to read a foreign language? You’re not alone. All those numbers and acronyms can be intimidating, making it seem impossible to truly gauge a company’s health.

Let’s use Berkshire Hathaway as our classroom. By exploring what this unique company is, you’ll learn how to use two simple financial concepts to get a clearer picture of its performance—a skill you can apply to almost any company you’re curious about.

What Is Berkshire Hathaway, Really?

Berkshire Hathaway doesn’t operate like most companies you know. While Apple makes iPhones and Ford makes trucks, Berkshire doesn’t have one primary product. It isn’t a single business; it’s a collection of them.

Think of Berkshire Hathaway as a giant shopping cart. Over many decades, its CEO Warren Buffett has filled that cart with dozens of completely separate companies. This is how Berkshire Hathaway makes money: by owning and collecting profits from a diverse group of businesses, including household names like:

GEICO (car insurance)
Dairy Queen (fast food and treats)
BNSF Railway (one of America’s largest railroads)
See’s Candies (chocolates)

This unique structure is why comparing Berkshire to a company like Apple is difficult—it’s like comparing an entire, fully-stocked grocery cart to a single gallon of milk. This raises an important question: if it’s so different, who are Berkshire’s actual competitors?

Who Are Berkshire’s ‘Competitors’?

Since Berkshire Hathaway is a collection of many different businesses, its true competitor isn’t another single company. Instead, it must be measured against the entire market. The goal is to see if Warren Buffett’s hand-picked “shopping cart” of companies performs better than just owning a small piece of everything. For this, investors use a benchmark, and the most common one is the S&P 500.

Think of the S&P 500 as the “league average” for big business. It’s a list of the 500 largest and most influential companies in the United States, from tech giants to major banks. When you hear that “the market is up,” people are usually talking about the S&P 500. By tracking the average performance of these 500 companies, we get a powerful measuring stick to judge Berkshire’s success.

Therefore, the most important question isn’t whether Berkshire makes more money than Ford or Apple. The real question is: does Berkshire’s performance beat the S&P 500? Answering this tells us if the company’s unique strategy creates superior results compared to investing in the market average.

First Health Check: Is Berkshire’s Business Growing?

To judge any company’s health, we start with two basic questions: how much money did it bring in, and how much did it actually keep? These two numbers are called revenue and net earnings, and they tell a crucial story. Think of it like owning a coffee shop. Your revenue is the total amount of cash in the register at the end of the year. It shows how popular you are.

But revenue is only half the picture. To find your actual profit, you must subtract all your costs—the coffee beans, employee salaries, and rent. What’s left over is your net earnings, or profit. This is the number that truly matters because it shows if the business is making money for its owners. For Berkshire, this represents the combined profit from all the companies in its “shopping cart.”

A healthy company doesn’t just make a profit; it grows that profit over time. For Berkshire, this means its collection of businesses, from GEICO to BNSF Railway, are becoming more efficient and successful year after year. Recent financial reports show that Berkshire’s operating earnings have grown, signaling that the underlying businesses are performing well.

Is BRK.B Stock ‘Expensive’ or ‘Cheap’? The P/E Ratio Explained

To answer whether a stock price is a good deal, investors turn to one of the most common key financial metrics: the Price-to-Earnings ratio, or P/E. This number connects the company’s stock price (the “Price”) to its actual profits (the “Earnings”). In simple terms, it’s a quick way to gauge how much investors are willing to pay for every dollar of a company’s profit.

Think of it like buying a small rental property. The P/E ratio is like asking, “If I buy this house, how many years of rent will it take to pay back the purchase price?” A property that pays for itself in 15 years (a P/E of 15) seems like a better deal on the surface than one that takes 30 years (a P/E of 30). In the stock market, a lower number can signal a “cheaper” investment relative to its earning power.

However, a P/E ratio is meaningless on its own. To get a sense of whether BRK.B is expensive, you must compare it to something else. A great benchmark is the S&P 500 index, which represents the average P/E for the 500 largest U.S. companies. This comparison helps you see if Berkshire is trading at a discount or a premium compared to the market itself.

Of course, this number is just a starting point. A low P/E might signal a bargain, or it could mean investors expect slow growth ahead. A high P/E could mean a stock is overpriced, or that everyone is excited about its future. This simple check gives us a powerful question to ask, not a final answer.

Your New 2-Step Framework for Analyzing Any Company

You now have a lens to look past the noise in financial reports. You can confidently ask the fundamental questions that reveal the health and value of a business, whether it’s a giant conglomerate or a company you see every day.

The next time you encounter a stock, run this simple two-step analysis to get your bearings:

Is the business growing? (Check revenue and net earnings over time).
Is the stock priced reasonably? (Check the P/E ratio vs. its ‘competitor’ or industry average).

This framework is your starting point for understanding a company’s financial story. The goal isn’t just to answer “is BRK.B a good investment?” but to build the confidence to ask that question about any company. You can begin to see the market not as a mystery, but as a collection of stories you have the power to understand.