The Cheapest S&P 500 Stock Is Up 520%: How Is That Possible?

The market can do absurd things.

A stock can look cheap on one measure, soar for a year, and still not be a bargain in the way most people think. That is the real point here. Price-to-earnings is only one lens, and when a company’s earnings explode off a low base, the chart can go vertical while the valuation still looks modest.

Key Takeaways

A stock can rise 520% and still be called “cheap” if earnings are rising fast enough.
Cheapness depends on the metric: P/E, forward P/E, EV/EBITDA, sales, cash flow, and growth all tell different stories.
A huge one-year gain often follows a depressed starting point, which makes percentage moves look more shocking than they are.
Not every cheap stock is a bargain; sometimes it is just a stock with a low multiple and a lot of hidden risk.
Investors should focus on fundamentals, balance-sheet strength, and whether the earnings surge is durable.

What is the Cheapest Stock in the S&P 500?

The phrase usually means the stock with the lowest valuation multiple in the index, often measured by trailing or forward earnings. But that is not the same as “best value,” and it certainly does not mean “safest.” I’ve looked at enough portfolios to know the trap: people confuse a low P/E with a margin of safety, then act surprised when the business turns out to be cyclical, messy, or one bad quarter away from a faceplant.

Here’s the kicker. A stock can be the cheapest in the S&P 500 because earnings are unusually strong, not because the business is broken. That happens when profits rebound sharply after a slump, when commodity prices move in the company’s favor, or when a restructuring cuts costs faster than analysts expected. In those cases, the market is not being irrational. It is simply repricing earnings power.

The Barron’s headline raises the obvious question: how can the cheapest stock in the S&P 500 also be up 520% over the last year? Easy. The base matters. If a company’s stock was crushed, then a rebound can produce an enormous percentage gain without making the business expensive. A $10 stock that becomes $62 is up 520%, but the valuation may still be reasonable if profits have multiplied too.

That is why serious investors study the full picture. I mean all of it: revenue trend, operating margin, free cash flow, debt, capital expenditures, and business quality. A stock can be statistically cheap and economically shaky at the same time. Or it can be cheap because the market has finally noticed that earnings are real and sticky.

For background on valuation methods, the SEC explains the basics of financial statements and ratios in investor education materials at source, while the CFA Institute has repeatedly emphasized that no single ratio tells the whole story in equity analysis at source.

The truth is, cheap stocks are rarely simple. They are often messy, misunderstood, and tied to industries where sentiment swings hard. That is fine. Markets are not catechism class; they do not reward neatness. They reward cash flow, discipline, and patience.

Core Benefits and Why This Matters

Why should anyone care about a stock that looks cheap and still surged more than fivefold? Because it teaches the market’s favorite lesson: valuation and momentum are not opposites. They often show up together after a company proves itself.

Cheap does not mean dead. A low multiple can signal a turnaround, not a terminal decline. If earnings improve fast enough, the stock can still be inexpensive after a huge run.
Big gains can start from ugly setups. Many of the best-performing stocks begin from beaten-down prices, broken expectations, and abandoned sentiment. That is where the math gets weird.
Valuation discipline still matters. When I ran the numbers on several high-flyers over the years, the winners usually had more than a headline story. They had actual profit growth, better balance sheets, or a real shift in business conditions.
It highlights the danger of lazy screening. Investors who only screen for “cheap” often end up buying traps. A low multiple can hide shrinking demand, rising debt, or permanent margin pressure.
It rewards stewardship, not speculation. In a world where capital should serve productive ends, the better question is whether the business creates durable value, supports workers and customers well, and allocates resources responsibly.

Everyone loves a simple rule. Buy low P/E stocks and wait. Nice in theory, nonsense in practice. The market punishes lazy thinking. A company may look cheap because its earnings are cyclical and temporarily high, or because the market expects the next downturn to hit hard. Either way, the investor who ignores business quality is not investing. He is guessing.

There is also a moral angle here, subtle but real. Sound investing is a form of stewardship. Capital is not a toy. It should be allocated with prudence, honesty, and concern for the common good. That does not mean avoiding profit. It means refusing to confuse greed with wisdom.

If you want a broader framework for separating value from noise, see the SEC’s plain-English guide to financial statements at source and the Federal Reserve’s data on financial conditions at source. Interest rates, credit conditions, and sector rotation can make a cheap stock look radically different over a year.

Step-by-Step Guide to Evaluating a 520% Winner That Still Looks Cheap

Do not get starry-eyed.

A huge move is not proof of genius, and a low valuation is not proof of value. If you want to evaluate a stock like this properly, use a disciplined process. Frankly, most investors skip steps and then wonder why their portfolios behave like loose wheelbarrows.

Start with the valuation metric. Look at trailing P/E, forward P/E, price-to-sales, EV/EBITDA, and free cash flow yield. One ratio can mislead you, especially after a company has had a blowout year. Forward numbers matter more when earnings are changing quickly.
Check whether earnings are cyclical. If the company operates in energy, financials, industrials, or commodities, the recent surge may reflect a favorable cycle rather than a lasting reset. Cycles can lift profits fast and then take them away just as fast.
Study the balance sheet. Debt matters. A lot. A company with a cheap stock and heavy leverage can turn ugly fast when margins compress or refinancing costs rise. The balance sheet is the thing that keeps a temporary setback from becoming a disaster.
Read the cash flow statement. Reported earnings can flatter management. Cash is harder to fake. If operating cash flow and free cash flow are not improving, the headline gain may be on thinner ice than it looks.
Compare the current multiple with history. Is the stock cheap versus itself, versus peers, and versus the market? The answer will differ. A stock can be inexpensive relative to the S&P 500 but expensive relative to its own historical range.
Ask what changed. Did the company cut costs, raise prices, improve mix, or benefit from commodity inflation? If the improvement is structural, the rerating may last. If it is temporary, beware.
Look for quality signals. Strong return on invested capital, stable margins, good capital allocation, and sane management incentives all matter. A cheap stock with no quality is usually just a cheap headache.
Test the downside. What happens if earnings fall 20%? 40%? Can the company still cover interest, maintain dividends, and invest in the business? Risk management is not optional. It is the whole ballgame.
Size the position correctly. Even if the setup looks attractive, do not bet the ranch. Diversification and asset allocation remain boring because they work. That is not a slogan. It is arithmetic.
Reassess continuously. A stock that moved 520% can stop being cheap fast. Re-run the thesis when quarterly results arrive, not when the price chart flatters your ego.

For more context on valuation discipline and company analysis, see the U.S. Securities and Exchange Commission’s investor tools at source and Morningstar’s guidance on stock valuation at source.

Comparison Table

Below is the part people usually skip, which is exactly why they get burned.

Factor	Cheapest S&P 500 Stock	Typical High-Growth Competitor
Valuation	Low P/E or low EV/EBITDA	Higher P/E, often rich growth multiple
Recent Price Performance	Can be +520% after a rebound	Often positive but less explosive
Earnings Pattern	Frequently cyclical or recovering	More stable growth, though not always
Risk Profile	Higher business and earnings volatility	Higher valuation risk, sometimes lower balance-sheet risk
Investor Appeal	Value investors, contrarians, turnaround hunters	Growth investors, momentum followers
Downside Risk	Can be severe if the cycle turns	Can be severe if growth disappoints
Best Use Case	When the business has durable earnings power and clean finances	When growth is consistent and valuation is still justified

A table like this exposes the illusion. The cheapest stock may still be the better buy, but only if the business is not a value trap. The competitor may look richer on paper, but it can deserve its premium if revenue growth, margins, and market share are stronger. Markets price probabilities, not fairy tales.

Common Mistakes to Avoid.

People make the same blunders over and over.

Chasing a big gain after it has already happened. A 520% move feels exciting. That does not mean another 520% is around the corner. Usually, it means expectations have changed and you are arriving late.
Equating “cheap” with “safe.” Low valuations can hide real trouble. A company with weak pricing power, shrinking margins, or heavy debt is not safe just because the multiple is low.
Ignoring sector context. A cheap industrial stock and a cheap software stock are not the same animal. Different sectors deserve different valuation ranges because their economics differ.
Trusting adjusted earnings blindly. Management loves adjusted numbers when the raw numbers look ugly. Sometimes adjustments are fair. Sometimes they are cosmetic. Read the footnotes.
Forgetting opportunity cost. Money locked in a mediocre bargain cannot compound elsewhere. That matters. Capital should be put where it can work with discipline and justice, not just where the chart is loud.
Overconcentrating. One stock, no matter how cheap, is not a portfolio. Diversification is not cowardice. It is protection against your own overconfidence.

Here is the thing nobody tells you: the market often rewards patience more than cleverness, but only if your patience is attached to sound analysis. Blind patience is just stubbornness wearing a necktie.

If you want a reputable primer on risk and portfolio construction, the FINRA Investor Education Foundation has practical material at source, and Vanguard’s research on diversification remains worth reading at source.

Frequently Asked Questions

What does it mean for a stock to be the cheapest in the S&P 500?
It usually means it has the lowest valuation multiple on a chosen metric, such as trailing P/E or forward P/E. That does not automatically make it the best value.

How can a stock rise 520% and still be cheap?
Because the starting point may have been deeply depressed, while earnings improved sharply. If profits grow faster than price, the valuation can still look reasonable.

Is a low P/E always a good sign?
No. A low P/E can reflect real bargain conditions, but it can also signal weak growth, cyclical earnings, debt, or business risk. Low multiples need context.

Should investors buy stocks after huge one-year gains?
Only if the business fundamentals still support the price. Otherwise, the move may already reflect the easy money.

Final Thought

A stock that is cheap and up 520% is not a contradiction. It is a warning against shallow thinking.

Markets reprice earnings, not just headlines. They reward businesses that prove their worth, punish those that disappoint, and occasionally do both in the same quarter. The wise investor does not chase a story because it is loud. He studies the numbers, respects the risks, and remembers that capital is meant to be used well.

That is the whole game, really. Not spectacle. Not slogans. Just sober judgment, honest accounting, and the discipline to treat money as a responsibility, not a toy.