This page is an extension of the Significance page where you will learn more about the relationship of favorable/unfavorable earnings and average stock price gap up/down, average close, and average high/low for the prior earnings days, based where the stock price is relative to its 52-week-high or 52-week-low.
Have you ever wondered if a stock price is too expensive or too cheap? This page helps you determine whether to invest when a stock is overvalued or undervalued.
Let’s continue with the example from the Significance page. The company releases favorable earnings 90% of the time and unfavorable earnings 10% of the time (known from the Earnings page). When the company releases favorable earnings, their stock price closes 20% higher on average. On the other hand, when they release unfavorable earnings, their stock price closes 5% lower on average (known from the significance page). Now, let’s say when the company’s stock price is near its 52-week-high, the stock closes 23% higher on average when they release favorable earnings. On the other hand, when they release unfavorable earnings and the price is near its 52-week-high, the stock closes 3% lower on average. This means that when the stock is near its 52-week-high, you have a 90% chance of making 23% in profit when the company releases earnings, with only a 10% chance of losing 3% of your investment.