Stock Analysis on Net

Steel Dynamics Inc. (NASDAQ:STLD)

This company has been moved to the archive! The financial data has not been updated since October 26, 2022.

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 Steel Dynamics Inc. common stock.


Rates of Return

Steel Dynamics Inc., monthly rates of return

Microsoft Excel
Steel Dynamics Inc. (STLD) Standard & Poor’s 500 (S&P 500)
t Date PriceSTLD,t1 DividendSTLD,t1 RSTLD,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2017 $33.81 2,278.87
1. Feb 28, 2017 $36.60 8.25% 2,363.64 3.72%
2. Mar 31, 2017 $34.76 $0.155 -4.60% 2,362.72 -0.04%
3. Apr 30, 2017 $36.14 3.97% 2,384.20 0.91%
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2021 $59.80 -9.50% 4,567.00 -0.83%
59. Dec 31, 2021 $62.07 $0.26 4.23% 4,766.18 4.36%
Average (R): 1.72% 1.36%
Standard deviation: 9.98% 4.48%
Steel Dynamics Inc. (STLD) Standard & Poor’s 500 (S&P 500)
t Date PriceSTLD,t1 DividendSTLD,t1 RSTLD,t2 PriceS&P 500,t RS&P 500,t3
Jan 31, 2017 $33.81 2,278.87
1. Feb 28, 2017 $36.60 8.25% 2,363.64 3.72%
2. Mar 31, 2017 $34.76 $0.155 -4.60% 2,362.72 -0.04%
3. Apr 30, 2017 $36.14 3.97% 2,384.20 0.91%
4. May 31, 2017 $33.99 -5.95% 2,411.80 1.16%
5. Jun 30, 2017 $35.81 $0.155 5.81% 2,423.41 0.48%
6. Jul 31, 2017 $35.41 -1.12% 2,470.30 1.93%
7. Aug 31, 2017 $34.45 -2.71% 2,471.65 0.05%
8. Sep 30, 2017 $34.47 $0.155 0.51% 2,519.36 1.93%
9. Oct 31, 2017 $37.21 7.95% 2,575.26 2.22%
10. Nov 30, 2017 $38.50 3.47% 2,647.58 2.81%
11. Dec 31, 2017 $43.13 $0.155 12.43% 2,673.61 0.98%
12. Jan 31, 2018 $45.40 5.26% 2,823.81 5.62%
13. Feb 28, 2018 $46.25 1.87% 2,713.83 -3.89%
14. Mar 31, 2018 $44.22 $0.1875 -3.98% 2,640.87 -2.69%
15. Apr 30, 2018 $44.81 1.33% 2,648.05 0.27%
16. May 31, 2018 $49.43 10.31% 2,705.27 2.16%
17. Jun 30, 2018 $45.95 $0.1875 -6.66% 2,718.37 0.48%
18. Jul 31, 2018 $47.09 2.48% 2,816.29 3.60%
19. Aug 31, 2018 $45.73 -2.89% 2,901.52 3.03%
20. Sep 30, 2018 $45.19 $0.1875 -0.77% 2,913.98 0.43%
21. Oct 31, 2018 $39.60 -12.37% 2,711.74 -6.94%
22. Nov 30, 2018 $35.20 -11.11% 2,760.17 1.79%
23. Dec 31, 2018 $30.04 $0.1875 -14.13% 2,506.85 -9.18%
24. Jan 31, 2019 $36.59 21.80% 2,704.10 7.87%
25. Feb 28, 2019 $37.32 2.00% 2,784.49 2.97%
26. Mar 31, 2019 $35.27 $0.24 -4.85% 2,834.40 1.79%
27. Apr 30, 2019 $31.68 -10.18% 2,945.83 3.93%
28. May 31, 2019 $25.15 -20.61% 2,752.06 -6.58%
29. Jun 30, 2019 $30.20 $0.24 21.03% 2,941.76 6.89%
30. Jul 31, 2019 $31.51 4.34% 2,980.38 1.31%
31. Aug 31, 2019 $27.00 -14.31% 2,926.46 -1.81%
32. Sep 30, 2019 $29.80 $0.24 11.26% 2,976.74 1.72%
33. Oct 31, 2019 $30.36 1.88% 3,037.56 2.04%
34. Nov 30, 2019 $33.73 11.10% 3,140.98 3.40%
35. Dec 31, 2019 $34.04 $0.24 1.63% 3,230.78 2.86%
36. Jan 31, 2020 $29.88 -12.22% 3,225.52 -0.16%
37. Feb 29, 2020 $26.63 -10.88% 2,954.22 -8.41%
38. Mar 31, 2020 $22.54 $0.25 -14.42% 2,584.59 -12.51%
39. Apr 30, 2020 $24.27 7.68% 2,912.43 12.68%
40. May 31, 2020 $26.56 9.44% 3,044.31 4.53%
41. Jun 30, 2020 $26.09 $0.25 -0.83% 3,100.29 1.84%
42. Jul 31, 2020 $27.41 5.06% 3,271.12 5.51%
43. Aug 31, 2020 $29.52 7.70% 3,500.31 7.01%
44. Sep 30, 2020 $28.63 $0.25 -2.17% 3,363.00 -3.92%
45. Oct 31, 2020 $31.48 9.95% 3,269.96 -2.77%
46. Nov 30, 2020 $36.21 15.03% 3,621.63 10.75%
47. Dec 31, 2020 $36.87 $0.25 2.51% 3,756.07 3.71%
48. Jan 31, 2021 $34.27 -7.05% 3,714.24 -1.11%
49. Feb 28, 2021 $41.58 21.33% 3,811.15 2.61%
50. Mar 31, 2021 $50.76 $0.26 22.70% 3,972.89 4.24%
51. Apr 30, 2021 $54.22 6.82% 4,181.17 5.24%
52. May 31, 2021 $62.43 15.14% 4,204.11 0.55%
53. Jun 30, 2021 $59.60 $0.26 -4.12% 4,297.50 2.22%
54. Jul 31, 2021 $64.45 8.14% 4,395.26 2.27%
55. Aug 31, 2021 $67.49 4.72% 4,522.68 2.90%
56. Sep 30, 2021 $58.48 $0.26 -12.96% 4,307.54 -4.76%
57. Oct 31, 2021 $66.08 13.00% 4,605.38 6.91%
58. Nov 30, 2021 $59.80 -9.50% 4,567.00 -0.83%
59. Dec 31, 2021 $62.07 $0.26 4.23% 4,766.18 4.36%
Average (R): 1.72% 1.36%
Standard deviation: 9.98% 4.48%

Show all

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

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

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


Variance and Covariance

Steel Dynamics Inc., calculation of variance and covariance of returns

Microsoft Excel
t Date RSTLD,t RS&P 500,t (RSTLD,tRSTLD)2 (RS&P 500,tRS&P 500)2 (RSTLD,tRSTLD)×(RS&P 500,tRS&P 500)
1. Feb 28, 2017 8.25% 3.72% 42.61 5.58 15.42
2. Mar 31, 2017 -4.60% -0.04% 40.04 1.95 8.84
3. Apr 30, 2017 3.97% 0.91% 5.04 0.20 -1.01
. . . . . . .
. . . . . . .
. . . . . . .
58. Nov 30, 2021 -9.50% -0.83% 126.06 4.80 24.60
59. Dec 31, 2021 4.23% 4.36% 6.28 9.02 7.53
Total (Σ): 5,773.13 1,164.17 1,736.03
t Date RSTLD,t RS&P 500,t (RSTLD,tRSTLD)2 (RS&P 500,tRS&P 500)2 (RSTLD,tRSTLD)×(RS&P 500,tRS&P 500)
1. Feb 28, 2017 8.25% 3.72% 42.61 5.58 15.42
2. Mar 31, 2017 -4.60% -0.04% 40.04 1.95 8.84
3. Apr 30, 2017 3.97% 0.91% 5.04 0.20 -1.01
4. May 31, 2017 -5.95% 1.16% 58.88 0.04 1.54
5. Jun 30, 2017 5.81% 0.48% 16.70 0.77 -3.58
6. Jul 31, 2017 -1.12% 1.93% 8.07 0.33 -1.64
7. Aug 31, 2017 -2.71% 0.05% 19.67 1.70 5.78
8. Sep 30, 2017 0.51% 1.93% 1.48 0.33 -0.70
9. Oct 31, 2017 7.95% 2.22% 38.75 0.74 5.36
10. Nov 30, 2017 3.47% 2.81% 3.04 2.10 2.53
11. Dec 31, 2017 12.43% 0.98% 114.59 0.14 -4.01
12. Jan 31, 2018 5.26% 5.62% 12.52 18.15 15.08
13. Feb 28, 2018 1.87% -3.89% 0.02 27.59 -0.78
14. Mar 31, 2018 -3.98% -2.69% 32.58 16.37 23.10
15. Apr 30, 2018 1.33% 0.27% 0.15 1.18 0.42
16. May 31, 2018 10.31% 2.16% 73.72 0.64 6.89
17. Jun 30, 2018 -6.66% 0.48% 70.31 0.76 7.33
18. Jul 31, 2018 2.48% 3.60% 0.57 5.04 1.70
19. Aug 31, 2018 -2.89% 3.03% 21.27 2.78 -7.70
20. Sep 30, 2018 -0.77% 0.43% 6.22 0.86 2.32
21. Oct 31, 2018 -12.37% -6.94% 198.64 68.86 116.96
22. Nov 30, 2018 -11.11% 1.79% 164.74 0.18 -5.49
23. Dec 31, 2018 -14.13% -9.18% 251.24 111.00 166.99
24. Jan 31, 2019 21.80% 7.87% 403.21 42.39 130.73
25. Feb 28, 2019 2.00% 2.97% 0.07 2.61 0.44
26. Mar 31, 2019 -4.85% 1.79% 43.22 0.19 -2.86
27. Apr 30, 2019 -10.18% 3.93% 141.68 6.62 -30.63
28. May 31, 2019 -20.61% -6.58% 498.92 62.97 177.26
29. Jun 30, 2019 21.03% 6.89% 372.86 30.64 106.88
30. Jul 31, 2019 4.34% 1.31% 6.83 0.00 -0.12
31. Aug 31, 2019 -14.31% -1.81% 257.19 10.03 50.79
32. Sep 30, 2019 11.26% 1.72% 90.92 0.13 3.43
33. Oct 31, 2019 1.88% 2.04% 0.02 0.47 0.11
34. Nov 30, 2019 11.10% 3.40% 87.91 4.19 19.19
35. Dec 31, 2019 1.63% 2.86% 0.01 2.25 -0.14
36. Jan 31, 2020 -12.22% -0.16% 194.46 2.31 21.21
37. Feb 29, 2020 -10.88% -8.41% 158.78 95.43 123.10
38. Mar 31, 2020 -14.42% -12.51% 260.63 192.37 223.91
39. Apr 30, 2020 7.68% 12.68% 35.42 128.29 67.41
40. May 31, 2020 9.44% 4.53% 59.47 10.05 24.45
41. Jun 30, 2020 -0.83% 1.84% 6.51 0.23 -1.23
42. Jul 31, 2020 5.06% 5.51% 11.12 17.24 13.85
43. Aug 31, 2020 7.70% 7.01% 35.69 31.91 33.74
44. Sep 30, 2020 -2.17% -3.92% 15.15 27.89 20.55
45. Oct 31, 2020 9.95% -2.77% 67.74 17.01 -33.95
46. Nov 30, 2020 15.03% 10.75% 176.92 88.30 124.99
47. Dec 31, 2020 2.51% 3.71% 0.62 5.54 1.86
48. Jan 31, 2021 -7.05% -1.11% 77.02 6.11 21.69
49. Feb 28, 2021 21.33% 2.61% 384.41 1.57 24.53
50. Mar 31, 2021 22.70% 4.24% 440.12 8.33 60.54
51. Apr 30, 2021 6.82% 5.24% 25.93 15.09 19.78
52. May 31, 2021 15.14% 0.55% 180.04 0.65 -10.86
53. Jun 30, 2021 -4.12% 2.22% 34.11 0.75 -5.04
54. Jul 31, 2021 8.14% 2.27% 41.13 0.84 5.88
55. Aug 31, 2021 4.72% 2.90% 8.96 2.38 4.61
56. Sep 30, 2021 -12.96% -4.76% 215.77 37.39 89.82
57. Oct 31, 2021 13.00% 6.91% 127.05 30.87 62.63
58. Nov 30, 2021 -9.50% -0.83% 126.06 4.80 24.60
59. Dec 31, 2021 4.23% 4.36% 6.28 9.02 7.53
Total (Σ): 5,773.13 1,164.17 1,736.03

Show all

VarianceSTLD = Σ(RSTLD,tRSTLD)2 ÷ (59 – 1)
= 5,773.13 ÷ (59 – 1)
= 99.54

VarianceS&P 500 = Σ(RS&P 500,tRS&P 500)2 ÷ (59 – 1)
= 1,164.17 ÷ (59 – 1)
= 20.07

CovarianceSTLD, S&P 500 = Σ(RSTLD,tRSTLD)×(RS&P 500,tRS&P 500) ÷ (59 – 1)
= 1,736.03 ÷ (59 – 1)
= 29.93


Systematic Risk (β) Estimation

Microsoft Excel
VarianceSTLD 99.54
VarianceS&P 500 20.07
CovarianceSTLD, S&P 500 29.93
Correlation coefficientSTLD, S&P 5001 0.67
βSTLD2 1.49
αSTLD3 -0.30%

Calculations

1 Correlation coefficientSTLD, S&P 500
= CovarianceSTLD, S&P 500 ÷ (Standard deviationSTLD × Standard deviationS&P 500)
= 29.93 ÷ (9.98% × 4.48%)
= 0.67

2 βSTLD
= CovarianceSTLD, S&P 500 ÷ VarianceS&P 500
= 29.93 ÷ 20.07
= 1.49

3 αSTLD
= AverageSTLD – βSTLD × AverageS&P 500
= 1.72%1.49 × 1.36%
= -0.30%


Expected Rate of Return

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.69%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk (β) of Steel Dynamics Inc. common stock βSTLD 1.49
 
Expected rate of return on Steel Dynamics Inc. common stock3 E(RSTLD) 18.25%

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(RSTLD) = RF + βSTLD [E(RM) – RF]
= 4.69% + 1.49 [13.79%4.69%]
= 18.25%