At today's price, Berkshire Hathaway's stock is pricing in about 16.6% annual free-cash-flow growth for the next ten years. Over the past five years, the company's actual revenue grew just 7.7% a year — less than half what the price now requires.
At its current price, BRK.B implies ~16.6% annual FCF growth for the next 10 years, discounted at 9%.
Berkshire's actual 5-year revenue growth has averaged just 7.7% a year.
Required growth vs. historical growth
Required growth from the reverse DCF below. Historical CAGRs from 10-K FY2025/FY2022 financial statements. FCF CAGR is volatile and understates true business strength — see "What would move this number" below.
Sensitivity: what if the discount rate moves?
| WACC | Required growth (latest FCF) | Required growth (3-yr avg FCF) |
|---|---|---|
| 7% | 11.2% | 12.7% |
| 9% (base case) | 16.6% | 18.3% |
| 11% | 21.2% | 22.9% |
Even at the lowest discount rate tested (7%), the required growth rate (11.2%) still exceeds the 5-year revenue CAGR (7.7%).
What would move this number
- The single biggest swing factor: how you treat Berkshire's $321.4B in short-term U.S. Treasury bills. Netting them fully against debt as "spendable cash" would shrink enterprise value to $825.4B and drop the required growth rate to 12.3% at a 9% discount rate — much closer to the 7.7% revenue CAGR. But most of that Treasury pile backs future insurance-claim obligations, so whether it's genuinely "spare cash" for shareholders is debatable.
- Using the 3-year average FCF ($22.1B) instead of FY2025's FCF ($25.0B) raises the required growth rate from 16.6% to 18.3%. FCF fell sharply to $11.6B in FY2024 on a capex surge, and that volatility means the FCF CAGR (-1.1%) badly distorts the read on the underlying business — revenue (7.7%) and core operating earnings (11.8%) growth are more reliable comparison points.
- The model's own structural limit: a large share of Berkshire's real value comes not from operating free cash flow but from the market-value swings of its stock and company holdings. A reverse DCF built around FCF simply can't capture that, making it a cruder approximation for a holding company like Berkshire than for an ordinary operating business.
Show your work
Inputs, sources, model assumptions, and the calculation
- Share price (BRK.B)$495.82 — stockanalysis.com, Aug 21, 2026 close
- Diluted shares (B-equivalent)2,157,334,500 — Class A weighted-average shares (1,438,223) × 1,500 conversion ratio
- Market cap$1,069.65B — price × B-equivalent shares (calculated)
- Total debt$129,081M — 10-K FY2025 balance sheet (insurance/other + railroad/energy/utilities combined)
- Cash and equivalents$51,877M — 10-K FY2025 balance sheet
- Net debt (base case, excludes T-bills)$77,204M — calculated
- Enterprise value (base case)$1,146,854M — market cap + net debt
- FCF (FY2025)$25,042M — 10-K FY2025 cash flow statement
- 3-year average FCF (FY2023-2025)$22,148M
- Discount rate (WACC)9% base case (7%/11% tested)
- Terminal growth rate2.5% — long-run GDP-level assumption
Normalization note: FY2025 FCF ($25.0B) is 13.1% above the three-year average ($22.1B) — within the ±40% threshold, so used as-is without adjustment, though the sensitivity table above shows both bases given FCF's known volatility.
Model: free cash flow is assumed to grow at a constant annual rate g for 10 years, then at a 2.5% terminal rate thereafter, solved by bisection for the value of g that equates present value to today's enterprise value.
Historical CAGR check: 5-yr revenue CAGR and 5-yr core operating earnings CAGR computed from 10-K FY2025 and FY2022 income statements; FCF CAGR computed from FY2025 and FY2021 cash flow statements.
The fine print
- This isn't a fair-value price target — it only shows what the current price already assumes.
- Change the discount rate, the FCF base, or how you treat Berkshire's Treasury-bill holdings, and the answer moves substantially — see the sensitivity table and "what would move it" section above.
- A reverse DCF built on operating cash flow is a poor fit for a holding company like Berkshire, where much of the real value comes from equity-portfolio and subsidiary market-value swings that this model doesn't capture at all.
- Whether 16.6% growth is realistic depends on new CEO Greg Abel's actual capital-allocation record — not on this math alone.
- Any investment decision, and its outcome, is your own responsibility.
Frequently asked questions
What growth rate does BRK.B's stock price assume?
At today's price, Berkshire's stock is pricing in about 16.6% annual free-cash-flow growth for the next ten years, at a 9% discount rate.
How does that compare to Berkshire's actual growth?
Berkshire's actual revenue grew 7.7% a year over the past five years (FY2021-FY2025) — less than half the 16.6% the current price requires. Core operating earnings grew faster, at 11.8% a year, but still fall short.
What share price was used for this analysis?
This analysis used $495.82 (BRK.B), as of the Aug 21, 2026 close.