Sometimes investment analysts refer to trading a stock within a specific price range. Take an insurer Aviva (LSE: AV.) – The share price has moved towards £5 on numerous occasions over the last year.

Sometimes it dropped before reaching this level, and sometimes (especially in April) it stayed above this level for quite a tiny time before starting to fall again.

What, if anything, does it mean to keep the price below five pounds a share? Will he be able to break this barrier?

There is momentum for a higher valuation

My answer is that there is nothing actually keeping the share price below the £5 mark.

Put simply, prices are usually a function of how many people are willing to sell their shares at a given level and how much demand there is to buy them at that amount.

Over the past few years, Aviva has won admirers in the city thanks to its focused business strategy, decent financial performance and significant dividend per share growth since its 2020 cut.

I think this helps explain why the insurer’s share price has risen over time, including by 13% in the last 12 months alone.

Cash flow generation potential

This means that the current price-to-earnings ratio is 10. This sounds economical, although in my opinion earnings are not always the best valuation metric for insurers. These may change frequently due to factors such as changes in the insurer’s assets held in the course of its business.

What’s clear, however, is that Aviva has a decent track record of generating significant free cash flow. If things stay the same, I think this could lend a hand keep both a juicy dividend and a share price above £5.

Social security contributions in the first nine months of this year. were 15% higher than in the same period last year. In the first half of the year, the company generated its own funds under Solvency II in the amount of GBP 758 million.

It shows FTSE100 the company’s continued ability to generate cash surpluses on a immense scale.

Some possible hazards along the way

That said, while business momentum is positive and I think this could push the share price above £5, this may not be the case.

The company’s operations are currently strongly focused on the British market. However, I believe that the feeble economy combined with high insurance premium increases in recent years could lead to a more hard market in the coming years as at least some insurers look to grow their businesses by competing on price.

However, if insurance market conditions remain forceful in the coming years and Aviva doesn’t make significant mistakes in its business, I think the stock could break above £5 (just 3% above the current price) and potentially stay above that level.

Given its 7% dividend yield, I believe this is a stock investors should consider buying.