Shares of discount retail chain Big Lots (NYSE: BIG) shot higher on Tuesday after the company reported financial results for its fiscal second quarter. As of 1:37 p.m. ET, Big Lots stock was up by 31%.

Based on a jump like that, you might expect that the brick-and-mortar chain reported good results for the period, which ended July 29. However, I must emphasize that the numbers weren't anything close to good: Net sales dropped by 15% year over year, and it booked a staggering net loss of $250 million. But the market had expected even worse numbers, and Big Lots' relative outperformance is why its stock headed upward.

Big Lots had trailing 12-month net sales of over $5 billion compared with a market capitalization of less than $200 million prior to Tuesday's rally. That's an extraordinarily low valuation, reflecting just how pessimistic investors are about this business.

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Source Fool.com