Key Metrics for NYSE BRK B Investors

Everyone’s heard of Warren Buffett, but his company, Berkshire Hathaway, is famously weird. It doesn’t sell a hit phone or a popular soda; it’s a giant collection of businesses, from insurance companies to railroads. So, how are you supposed to know if this is a good investment?

Looking at the stock (NYSE: BRK.B) can feel intimidating because the usual rules don’t quite apply. The good news is you can forget the complex Wall Street jargon. This guide breaks down three simple questions to evaluate the company’s health, giving you a clear framework grounded in how Warren Buffett himself asks shareholders to view the business.

Why You Can’t Evaluate Berkshire Hathaway Like Apple or Tesla

When you think about Apple, you think of iPhones. For Tesla, it’s electric cars. Judging their success seems straightforward: did they sell a lot of stuff? Applying that logic to Berkshire Hathaway is like nailing jello to a wall. The company doesn’t have a star product because it isn’t a single business.

Instead, Berkshire is a holding company. Think of it less like a single store and more like a shopping mall that owns all the stores inside. From GEICO insurance to Dairy Queen, its main job is to be a smart owner for its entire portfolio of companies.

This unique structure is why typical metrics, like total revenue, can be misleading for BRK.B. A better question isn’t “how much did it sell?” but “how much actual cash did its businesses generate?” Answering that is the first step to evaluating the company clearly.

Metric #1: Check Berkshire’s ‘Annual Salary’ with Operating Earnings

Think of your own finances: you have a predictable monthly salary and maybe some unpredictable gains from a hobby. Berkshire Hathaway is similar. The steady, reliable profit from the businesses it owns—like its railroad, utility companies, and See’s Candies—is called Operating Earnings. This is the company’s core “salary.”

However, Berkshire also owns a massive portfolio of stocks like Apple and Coca-Cola. Accounting rules require the company to report the wild, up-and-down value changes of these stocks in its final profit number. This creates a “net income” figure that can swing by tens of billions of dollars each quarter, making it a noisy and often misleading indicator of actual performance.

This is why Warren Buffett himself tells shareholders to ignore distracting market swings and focus on operating earnings. This number shows the true health and earning power of its collection of businesses. It’s the engine, not the weather. But knowing what the businesses earn is only half the story. The next question is, what is the entire company actually worth?

Metric #2: Is BRK.B a Good Deal? Using Book Value as Your Guide

Beyond its “annual salary,” we need to understand the company’s fundamental worth. Think of your personal net worth: the value of everything you own (house, car, savings) minus your debts (mortgage, loans). Berkshire has a similar figure, its “net worth” on paper, officially called Book Value. It represents the underlying value of all assets the company owns, from railroads to stock holdings, after subtracting all liabilities.

To make this practical, analysts calculate the Book Value per Share. This takes the company’s total book value and divides it by the number of available shares, giving you a baseline for what one piece of the company is worth. This provides a crucial anchor against the daily market price, which fluctuates with sentiment.

This leads to a powerful “bang-for-your-buck” calculation: the Price-to-Book (P/B) ratio. By dividing the current stock price by the book value per share, you can see how expensive the market thinks the company is. A P/B ratio of 1.5x, for example, means you’re paying $1.50 for every $1.00 of Berkshire’s stated book value.

For years, Warren Buffett provided a clear benchmark. He stated he would consider the stock a bargain and buy back shares if its price fell to 1.2 times its book value. While this isn’t a rigid rule today, it offers a fantastic historical reference point for judging whether the current price is fair. This stable foundation, however, is fueled by a unique advantage.

The Secret Weapon: Berkshire’s Insurance Float and Cash Hoard

Berkshire’s secret weapon is its massive insurance business. When you pay a premium to a company like GEICO, they hold onto your money, investing it for their own profit before needing to pay any claims. This giant pool of customer money is called insurance float. In simple terms, it’s a massive, interest-free loan from policyholders that Berkshire uses to buy more stocks and companies, generating more profit for shareholders.

This float, along with other profits, builds Berkshire’s famous cash hoard. Instead of being unproductive, this cash pile is a powerful strategic tool. It provides unmatched safety during economic downturns and gives Buffett the firepower to buy great businesses when they go on sale—often when others are panicking.

Together, the float and cash are the fuel for Berkshire’s growth engine. They allow the company to acquire new businesses, which in turn generate more earnings and increase its overall book value. This powerful cycle is key to how Warren Buffett measures success over the long term.

Your 3-Step Checklist for Confidently Evaluating BRK.B

You no longer need to view Berkshire Hathaway as an intimidating stock. You can look past the daily price to see the simple, powerful engine at its core. You understand how its business “salary” (operating earnings) and its financial fuel (float) work together to grow the company’s underlying “net worth” (book value).

Instead of guessing at BRK.B stock valuation methods, perform this quick health check anytime:

1. Check Operating Earnings: Is the company’s cash “salary” growing?
2. Check Book Value: Is its “net worth” per share steadily increasing?
3. Check the Price: Is its Price-to-Book ratio at a reasonable level?

Armed with this framework, you can ignore distracting debates over daily prices or BRK.B vs S&P 500 performance. You now have the tools to think like a patient owner and decide for yourself if Berkshire Hathaway is a good long-term investment for your goals.