Both Berkshire Hathaway and Micron Stocks Look Cheap on the Surface. But I Like 1 Better Than the Other.

Here's an odd pairing the market is serving up right now. Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB), the sprawling conglomerate, trades at about 15 times its earnings over the past year while sitting near its 52-week high. Micron Technology (NASDAQ: MU), the memory chipmaker, trades at about 20 times -- even though its stock has lost more than a third of its value from its peak and its earnings are exploding. Both valuations are below the overall market's valuation.

On the surface, the market is offering a good entry point into both stocks. But their underlying stories couldn't be more different.

Image source: Getty Images.

What's inside Berkshire's earnings

Berkshire's earnings come from dozens of businesses at once. The company owns a large insurance operation, the BNSF railroad, a regulated energy business, and a long list of manufacturers and service companies, plus an enormous stock portfolio on top.

The newest numbers show that mix working. Berkshire's first-quarter operating earnings rose 18% year over year to $11.3 billion.

Notably, the company also held a record of about $397 billion in cash and short-term Treasury bills at the end of the first quarter -- a war chest its new CEO Greg Abel has started putting to work, including an acquisition of homebuilder Taylor Morrison that closed in late July.

Of course, Berkshire's earnings figure needs one adjustment of its own. The company's reported net income swings wildly from quarter to quarter because accounting rules force it to run paper gains and losses from its stock portfolio through the income statement. Berkshire itself tells shareholders that these swings are usually meaningless for judging the business. Smooth them out, though, and what remains is a diversified stream of operating profit that tends to grind higher through most economic weather.

At about $512 per share as of this writing, Berkshire trades at about 15 times its reported earnings over the past year.

What's inside Micron's earnings

Micron's earnings come from selling memory chips (DRAM, NAND flash, and the high-bandwidth memory that AI (artificial intelligence) accelerators depend on), and right now, those chips are scarce.

The result is one of the steepest profit ramps in the market. Micron earned $4.60 per share in its fiscal first quarter of 2026, $12.07 in the second, and $24.67 in the third (the period ended May 28, 2026). And for the fiscal fourth quarter, management expects earnings per share near $31 on roughly $50 billion of revenue.

But this is a commodity business, and the same company reported a $5.8 billion net loss in fiscal 2023, when the last downturn crushed memory prices. Micron's earnings don't grind. They surge and collapse with the balance of supply and demand, and the current surge is the best one in the company's history.

That history explains the multiple. If investors believed Micron could earn at this pace indefinitely, a company whose revenue more than quadrupled last quarter would not trade at roughly the same earnings multiple as a conglomerate growing a small fraction as fast. The market is placing a bet inside that "20": a bet that today's earnings are closer to a cyclical peak than to a new normal.

Which number to trust

So, which multiple is the bargain it looks like it is?

Berkshire's 15 means roughly what it says. The earnings behind it are diversified, mostly recurring, and not sitting at any obvious cyclical extreme. An investor can compare that 15 to the market or to other stocks and draw a fair conclusion.

Micron's 20 is a different kind of number. It divides today's price by the most profitable 12 months Micron has ever produced -- by far. If those earnings normalize anywhere between the current boom and the last bust, the true price of a normal-year dollar of Micron profit is far higher than 20. That is precisely what the market is assuming.

Ultimately, I like both stocks at these prices. But I like the durability of Berkshire's earnings relative to its valuation slightly more.

Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and Micron Technology. The Motley Fool has a disclosure policy.