Fundamental Stock Screening

Point in Time Backtesting

52-week range

How can the 52-Week Range Help You?

When something stands the test of time, a level of confidence is placed in it for the future. The same thing goes for trading stocks and securities! The 52-week range allows investors to picture performance that enhances financial analysis.

Let’s dive into the significance of using time as a quantifier in your investment journey with a stock example that Equities Lab pointed out previously. 

What is a 52-week range?

The simplest answer is that it’s a framework, spanning a year-long range. However, it’s more than just a framework.

What is a 52-week range? A report on the lowest and highest price a stock has sold for within the last 52 weeks. Not the start of the 52 weeks to the end, but rather, the stock’s lowest (if first or second) and then highest (either first or second) prices.

What does it communicate? It will communicate the sensitivity of the stock to the market, an estimated execution time, or potential growth/downturn. 

If investors see that the closing price is near the high of the 52-week range, that might be a signal of a red flag, a sign not to jump in yet. If it’s close to the high, it’s more likely to come down. On the other hand, if the closing price is nearer to the low, that might be a green flag that it is an ideal time to invest. There is of course more to it, but this is generally how it can be used. 

52-Week Range Analogy 

Imagine Jennifer with her lemonade stand, is reflecting on her company’s past year of performance. 

She sold lemonade for the lowest price of $1.50  and the highest of $3. Meaning it fluctuated from $1.50 – $3 throughout the past year. She currently sells lemonade for $2. 

As Jennifer is reflecting, a new potential investor in the business is researching her stand. The investor, Buffet, finds the same information online and needs clarification about why a lemonade stand fluctuated to that extent. For Buffet, he looks at the stand and considers it a red flag that it went that low, then that high, just for lemonade.

Buffet decides not to invest in the stand because of the apparent volatility the stand has while performing in the market.

As an example, it shows that when you look at the price change, a red or green flag can pop up based on what you’re examining. It shows a company’s fluctuation. In this case, a negative one.

Real Life Example

In a previous article, the explosive growth of Abercrombie & Fitch (ANF) was covered due to their recent AI inclusion.

The company has performed well, and even more recently, the stock has continued to climb. Below are the financial metrics, as of 9/7/23, for the clothing company with the 52-week range highlighted. 

Financial MetricsAbercrombie & Fitch (ANF)
Closing Price54.5
52-Week Range14.43 — 54.69
Market Cap2.707b
Volume / Avg. 30 Day1.216m / 2.147m
P/E 24.7
Dividend / Yield 0 / 5.8 per 1,000
EPS T12M2.2 
Piotroski F-Score T12M6
Beta1.101
Green FlagsFree cash flow growth 
Red FlagsNone

What’s the difference in the 52-week range? A difference of 40.26 dollars shows that ANF has increased by over 280% in the last year. 

What does the closing price show? With a closing price of $54.5, the company is at a high. Typically, an investor would wait for the closing price to go down before making a move. If you invest at a high rate, especially one incredibly close to the high of a 52-week range, you’re more likely to lose on the investment unless you are confident in the company’s continued growth. 

Next, you could ask the following questions about the company:

  • Why is it performing positively? 
  • What’s the current financial health of the company? 
  • What’s the potential of a downward turn? 
  • What’s the potential for continued growth? 

After those questions are answered, you will have insight into whether it’s wise to invest now or if you have already missed the majority of the high.

Takeaways 

Considering selling at the highest price and buying at the lowest is not complicated. Ensuring you understand the impact of the financial metrics all working simultaneously can be a mental hurdle. Just remember, every metric comes with additional questions. You can analyze the 52-week range, then go and understand the content, then identify the company’s financial health, and so on and so forth.

The 52-week range is an additional metric to excite or deter you from a decision, happy investing!