In a recent publication, we introduced a carefully curated list titled "11 Ridiculously Cheap Stocks to Invest In." In this article, we will delve into the financial standing of Petrleo Brasileiro S.A., commonly known as Petrobras (NYSE:PBR), comparing it to other attractively priced stocks in the market.

Just as savvy shoppers search for bargains in the commodity marketby comparing prices, identifying products that are discounted, and ultimately selecting the items that offer the most value for their moneyinvesting in the financial market operates under a similar principle. In both scenarios, the importance of price cannot be overstated.

In a landscape where many stocks appear overpriced, the ability to identify hidden gems is what sets apart a wise investor from one who makes impulsive decisions. An investor who understands that value is not solely determined by the item purchased but rather by the price paid is typically better equipped to uncover stocks that are undervalued yet brimming with potential.

To better grasp the concept of a cheap stock, it is essential to understand what it actually entails. Generally, there are two prevalent interpretations of a cheap stock. The first is a stock that has a low share price. The second, which we will focus on, refers to an undervalued stockone that trades below its intrinsic value based on fundamental indicators such as earnings, revenue, or assets. This perspective aligns with our analysis, as we assert that a cheap stock is one that offers substantial value in relation to its actual worth, making it an attractive investment opportunity.

One effective way to identify cheap stocks is by utilizing the forward price-to-earnings (P/E) ratio. This ratio allows investors to assess how much they are paying for each dollar of a company's earnings. A low P/E ratio can be a strong indicator of an undervalued stock, particularly when compared to its industry competitors, historical averages, and broader market trends.

A report published by Hoover Capital Management (HCM) provides valuable insights into the historical performance of value versus growth stocks, utilizing the French High Minus Low (HML) factor. The analysis over an extensive period of 97 years, from July 1926 to December 2023, reveals a compelling case for value investing. The cumulative returns on value stocks have astonishingly outperformed growth stocks by a remarkable 3,000%. This statistic illustrates that value investing has provided returns a staggering 30 times greater than those yielded by growth investing.

Furthermore, research conducted by Economist Victoria Galsband reinforces this viewpoint. Her analysis demonstrated that cheap stocks consistently outperformed growth stocks across every G7 nation from 1975 to 2010, including major economies such as Canada, the United States, Japan, and several leading European countries.

Another pertinent study examined the implications of adding or removing companies from the S&P index on their valuations. Findings indicated that removals often correlate with stock undervaluation, while additions typically result in the opposite. A study by Research Affiliates highlighted a particularly striking trend: stocks that were removed from the S&P index between 1990 and 2022 outperformed their newly added counterparts by over 5% annually. This data supports our assertion that undervalued stocks, which we refer to as cheap stocks, are more likely to yield higher returns over time.