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By my estimate, Berkshire Hathaway’s normal earning power after tax is approximately $18 billion. This puts the stock at an adjusted P/E ratio of 11x based on today’s share price.

To get there, I assume the following:

  • Redemption of GE, GS and Swiss Re preferred
  • Normalized but still low interest rates
  • Normalized dividend for Wells Fargo and U.S. Bancorp
  • 2012 dividend increase per consensus estimates
  • IBM full-year dividend
  • Full-year earnings for Lubrizol
  • A more normal housing environment

Following Buffett, I also include undistributed earnings from Berkshire’s large equity holdings.

No adjustment has been made for Berkshire’s large cash holdings which I expect will approximate $40 billion after Q1, 2012, assuming no major purchases. This equates to almost $25,000 per A share.

Here is my data.

berkshire-hathaway-earnings

By Greg Speicher