Stock Analysis on Net
Stock Analysis on Net

Align Technology Inc. (NASDAQ:ALGN)

This company has been moved to the archive! The financial data has not been updated since November 3, 2023.

Capital Asset Pricing Model (CAPM) 

Microsoft Excel

Capital asset pricing model (CAPM) indicates what should be the expected or required rate of return on risky assets like Align Technology Inc. common stock.

Rates of Return

Align Technology Inc., monthly rates of return

Microsoft Excel
Align Technology Inc. (ALGN) Standard & Poor’s 500 (S&P 500)
t Date PriceALGN,t1 DividendALGN,t1 RALGN,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2018 $262.00 2,823.81
1. Feb 28, 2018 $262.52 0.20% 2,713.83 -3.89%
2. Mar 31, 2018 $251.13 -4.34% 2,640.87 -2.69%
3. Apr 30, 2018 $249.85 -0.51% 2,648.05 0.27%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2022 $196.66 1.21% 4,080.11 5.38%
59. Dec 31, 2022 $210.90 7.24% 3,839.50 -5.90%
Average (R): 0.78% 0.67%
Standard deviation: 14.90% 5.40%
Align Technology Inc. (ALGN) Standard & Poor’s 500 (S&P 500)
t Date PriceALGN,t1 DividendALGN,t1 RALGN,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2018 $262.00 2,823.81
1. Feb 28, 2018 $262.52 0.20% 2,713.83 -3.89%
2. Mar 31, 2018 $251.13 -4.34% 2,640.87 -2.69%
3. Apr 30, 2018 $249.85 -0.51% 2,648.05 0.27%
4. May 31, 2018 $331.95 32.86% 2,705.27 2.16%
5. Jun 30, 2018 $342.14 3.07% 2,718.37 0.48%
6. Jul 31, 2018 $356.65 4.24% 2,816.29 3.60%
7. Aug 31, 2018 $386.49 8.37% 2,901.52 3.03%
8. Sep 30, 2018 $391.22 1.22% 2,913.98 0.43%
9. Oct 31, 2018 $221.20 -43.46% 2,711.74 -6.94%
10. Nov 30, 2018 $229.89 3.93% 2,760.17 1.79%
11. Dec 31, 2018 $209.43 -8.90% 2,506.85 -9.18%
12. Jan 31, 2019 $248.95 18.87% 2,704.10 7.87%
13. Feb 28, 2019 $258.97 4.02% 2,784.49 2.97%
14. Mar 31, 2019 $284.33 9.79% 2,834.40 1.79%
15. Apr 30, 2019 $324.68 14.19% 2,945.83 3.93%
16. May 31, 2019 $284.35 -12.42% 2,752.06 -6.58%
17. Jun 30, 2019 $273.70 -3.75% 2,941.76 6.89%
18. Jul 31, 2019 $209.08 -23.61% 2,980.38 1.31%
19. Aug 31, 2019 $183.11 -12.42% 2,926.46 -1.81%
20. Sep 30, 2019 $180.92 -1.20% 2,976.74 1.72%
21. Oct 31, 2019 $252.29 39.45% 3,037.56 2.04%
22. Nov 30, 2019 $277.34 9.93% 3,140.98 3.40%
23. Dec 31, 2019 $279.04 0.61% 3,230.78 2.86%
24. Jan 31, 2020 $257.10 -7.86% 3,225.52 -0.16%
25. Feb 29, 2020 $218.35 -15.07% 2,954.22 -8.41%
26. Mar 31, 2020 $173.95 -20.33% 2,584.59 -12.51%
27. Apr 30, 2020 $214.85 23.51% 2,912.43 12.68%
28. May 31, 2020 $245.62 14.32% 3,044.31 4.53%
29. Jun 30, 2020 $274.44 11.73% 3,100.29 1.84%
30. Jul 31, 2020 $293.82 7.06% 3,271.12 5.51%
31. Aug 31, 2020 $296.98 1.08% 3,500.31 7.01%
32. Sep 30, 2020 $327.36 10.23% 3,363.00 -3.92%
33. Oct 31, 2020 $426.08 30.16% 3,269.96 -2.77%
34. Nov 30, 2020 $481.29 12.96% 3,621.63 10.75%
35. Dec 31, 2020 $534.38 11.03% 3,756.07 3.71%
36. Jan 31, 2021 $525.38 -1.68% 3,714.24 -1.11%
37. Feb 28, 2021 $567.11 7.94% 3,811.15 2.61%
38. Mar 31, 2021 $541.53 -4.51% 3,972.89 4.24%
39. Apr 30, 2021 $595.53 9.97% 4,181.17 5.24%
40. May 31, 2021 $590.15 -0.90% 4,204.11 0.55%
41. Jun 30, 2021 $611.00 3.53% 4,297.50 2.22%
42. Jul 31, 2021 $695.80 13.88% 4,395.26 2.27%
43. Aug 31, 2021 $709.00 1.90% 4,522.68 2.90%
44. Sep 30, 2021 $665.43 -6.15% 4,307.54 -4.76%
45. Oct 31, 2021 $624.37 -6.17% 4,605.38 6.91%
46. Nov 30, 2021 $611.53 -2.06% 4,567.00 -0.83%
47. Dec 31, 2021 $657.18 7.46% 4,766.18 4.36%
48. Jan 31, 2022 $494.96 -24.68% 4,515.55 -5.26%
49. Feb 28, 2022 $511.46 3.33% 4,373.94 -3.14%
50. Mar 31, 2022 $436.00 -14.75% 4,530.41 3.58%
51. Apr 30, 2022 $289.91 -33.51% 4,131.93 -8.80%
52. May 31, 2022 $277.64 -4.23% 4,132.15 0.01%
53. Jun 30, 2022 $236.67 -14.76% 3,785.38 -8.39%
54. Jul 31, 2022 $280.97 18.72% 4,130.29 9.11%
55. Aug 31, 2022 $243.70 -13.26% 3,955.00 -4.24%
56. Sep 30, 2022 $207.11 -15.01% 3,585.62 -9.34%
57. Oct 31, 2022 $194.30 -6.19% 3,871.98 7.99%
58. Nov 30, 2022 $196.66 1.21% 4,080.11 5.38%
59. Dec 31, 2022 $210.90 7.24% 3,839.50 -5.90%
Average (R): 0.78% 0.67%
Standard deviation: 14.90% 5.40%

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1 Data in US$ per share of common stock, adjusted for splits and stock dividends.

2 Rate of return on common stock of ALGN during period t

3 Rate of return on S&P 500 (the market portfolio proxy) during period t

Variance and Covariance

Align Technology Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RALGN,t RS&P 500,t (RALGN,t–RALGN)2 (RS&P 500,t–RS&P 500)2 (RALGN,t–RALGN)×(RS&P 500,t–RS&P 500)
1. Feb 28, 2018 0.20% -3.89% 0.34 20.81 2.67
2. Mar 31, 2018 -4.34% -2.69% 26.25 11.26 17.19
3. Apr 30, 2018 -0.51% 0.27% 1.68 0.16 0.51
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2022 1.21% 5.38% 0.18 22.17 2.02
59. Dec 31, 2022 7.24% -5.90% 41.68 43.08 -42.38
Total (Σ): 12,875.12 1,691.48 2,637.01
t Date RALGN,t RS&P 500,t (RALGN,t–RALGN)2 (RS&P 500,t–RS&P 500)2 (RALGN,t–RALGN)×(RS&P 500,t–RS&P 500)
1. Feb 28, 2018 0.20% -3.89% 0.34 20.81 2.67
2. Mar 31, 2018 -4.34% -2.69% 26.25 11.26 17.19
3. Apr 30, 2018 -0.51% 0.27% 1.68 0.16 0.51
4. May 31, 2018 32.86% 2.16% 1,028.81 2.23 47.93
5. Jun 30, 2018 3.07% 0.48% 5.22 0.03 -0.42
6. Jul 31, 2018 4.24% 3.60% 11.95 8.62 10.15
7. Aug 31, 2018 8.37% 3.03% 57.49 5.57 17.89
8. Sep 30, 2018 1.22% 0.43% 0.19 0.06 -0.10
9. Oct 31, 2018 -43.46% -6.94% 1,957.49 57.87 336.56
10. Nov 30, 2018 3.93% 1.79% 9.88 1.25 3.52
11. Dec 31, 2018 -8.90% -9.18% 93.79 96.91 95.34
12. Jan 31, 2019 18.87% 7.87% 327.09 51.87 130.25
13. Feb 28, 2019 4.02% 2.97% 10.50 5.32 7.47
14. Mar 31, 2019 9.79% 1.79% 81.14 1.27 10.14
15. Apr 30, 2019 14.19% 3.93% 179.74 10.66 43.77
16. May 31, 2019 -12.42% -6.58% 174.40 52.48 95.67
17. Jun 30, 2019 -3.75% 6.89% 20.52 38.77 -28.21
18. Jul 31, 2019 -23.61% 1.31% 595.09 0.42 -15.76
19. Aug 31, 2019 -12.42% -1.81% 174.39 6.13 32.69
20. Sep 30, 2019 -1.20% 1.72% 3.92 1.11 -2.08
21. Oct 31, 2019 39.45% 2.04% 1,494.88 1.89 53.22
22. Nov 30, 2019 9.93% 3.40% 83.62 7.50 25.04
23. Dec 31, 2019 0.61% 2.86% 0.03 4.81 -0.38
24. Jan 31, 2020 -7.86% -0.16% 74.78 0.69 7.17
25. Feb 29, 2020 -15.07% -8.41% 251.43 82.40 143.94
26. Mar 31, 2020 -20.33% -12.51% 446.01 173.67 278.32
27. Apr 30, 2020 23.51% 12.68% 516.56 144.43 273.14
28. May 31, 2020 14.32% 4.53% 183.25 14.91 52.27
29. Jun 30, 2020 11.73% 1.84% 119.88 1.37 12.83
30. Jul 31, 2020 7.06% 5.51% 39.40 23.46 30.40
31. Aug 31, 2020 1.08% 7.01% 0.08 40.19 1.84
32. Sep 30, 2020 10.23% -3.92% 89.21 21.06 -43.35
33. Oct 31, 2020 30.16% -2.77% 862.70 11.79 -100.84
34. Nov 30, 2020 12.96% 10.75% 148.18 101.77 122.80
35. Dec 31, 2020 11.03% 3.71% 104.98 9.28 31.20
36. Jan 31, 2021 -1.68% -1.11% 6.10 3.17 4.40
37. Feb 28, 2021 7.94% 2.61% 51.24 3.77 13.90
38. Mar 31, 2021 -4.51% 4.24% 28.04 12.80 -18.94
39. Apr 30, 2021 9.97% 5.24% 84.40 20.94 42.04
40. May 31, 2021 -0.90% 0.55% 2.85 0.01 0.20
41. Jun 30, 2021 3.53% 2.22% 7.55 2.42 4.27
42. Jul 31, 2021 13.88% 2.27% 171.46 2.59 21.06
43. Aug 31, 2021 1.90% 2.90% 1.24 4.98 2.48
44. Sep 30, 2021 -6.15% -4.76% 48.02 29.42 37.58
45. Oct 31, 2021 -6.17% 6.91% 48.37 39.03 -43.45
46. Nov 30, 2021 -2.06% -0.83% 8.07 2.25 4.26
47. Dec 31, 2021 7.46% 4.36% 44.63 13.65 24.68
48. Jan 31, 2022 -24.68% -5.26% 648.66 35.11 150.91
49. Feb 28, 2022 3.33% -3.14% 6.50 14.46 -9.69
50. Mar 31, 2022 -14.75% 3.58% 241.44 8.47 -45.23
51. Apr 30, 2022 -33.51% -8.80% 1,175.91 89.54 324.48
52. May 31, 2022 -4.23% 0.01% 25.17 0.44 3.32
53. Jun 30, 2022 -14.76% -8.39% 241.53 82.06 140.78
54. Jul 31, 2022 18.72% 9.11% 321.61 71.32 151.45
55. Aug 31, 2022 -13.26% -4.24% 197.39 24.11 68.99
56. Sep 30, 2022 -15.01% -9.34% 249.61 100.12 158.09
57. Oct 31, 2022 -6.19% 7.99% 48.58 53.58 -51.02
58. Nov 30, 2022 1.21% 5.38% 0.18 22.17 2.02
59. Dec 31, 2022 7.24% -5.90% 41.68 43.08 -42.38
Total (Σ): 12,875.12 1,691.48 2,637.01

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VarianceALGN = Σ(RALGN,t–RALGN)2 ÷ (59 – 1)
= 12,875.12 ÷ (59 – 1)
= 221.98

VarianceS&P 500 = Σ(RS&P 500,t–RS&P 500)2 ÷ (59 – 1)
= 1,691.48 ÷ (59 – 1)
= 29.16

CovarianceALGN, S&P 500 = Σ(RALGN,t–RALGN)×(RS&P 500,t–RS&P 500) ÷ (59 – 1)
= 2,637.01 ÷ (59 – 1)
= 45.47

Systematic Risk (β) Estimation

Microsoft Excel
VarianceALGN 221.98
VarianceS&P 500 29.16
CovarianceALGN, S&P 500 45.47
Correlation coefficientALGN, S&P 5001 0.57
βALGN2 1.56
αALGN3 -0.25%

Calculations

1 Correlation coefficientALGN, S&P 500
= CovarianceALGN, S&P 500 ÷ (Standard deviationALGN × Standard deviationS&P 500)
= 45.47 ÷ (14.90% × 5.40%)
= 0.57

2 βALGN
= CovarianceALGN, S&P 500 ÷ VarianceS&P 500
= 45.47 ÷ 29.16
= 1.56

3 αALGN
= AverageALGN – βALGN × AverageS&P 500
= 0.78% – 1.56 × 0.67%
= -0.25%

Expected Rate of Return

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.79%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk (β) of Align Technology Inc. common stock βALGN 1.56
 
Expected rate of return on Align Technology Inc. common stock3 E(RALGN) 18.83%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 E(RALGN) = RF + βALGN [E(RM) – RF]
= 4.79% + 1.56 [13.79% – 4.79%]
= 18.83%