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Further Upside For Reliance Global Group, Inc. (NASDAQ:RELI) Shares Could Introduce Price Risks After 51% Bounce
Those holding Reliance Global Group, Inc. (NASDAQ:RELI) shares would be relieved that the share price has rebounded 51% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 91% share price decline over the last year.
Although its price has surged higher, considering around half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 0.9x, you may still consider Reliance Global Group as an solid investment opportunity with its 0.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
Check out our latest analysis for Reliance Global Group
How Has Reliance Global Group Performed Recently?
Recent times have been advantageous for Reliance Global Group as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
Want the full picture on analyst estimates for the company? Then our free report on Reliance Global Group will help you uncover what's on the horizon.What Are Revenue Growth Metrics Telling Us About The Low P/S?
The only time you'd be truly comfortable seeing a P/S as low as Reliance Global Group's is when the company's growth is on track to lag the industry.
Taking a look back first, we see that the company grew revenue by an impressive 73% last year. Pleasingly, revenue has also lifted 276% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Turning to the outlook, the next year should generate growth of 23% as estimated by the lone analyst watching the company. That's shaping up to be materially higher than the 6.8% growth forecast for the broader industry.
In light of this, it's peculiar that Reliance Global Group's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
The Final Word
Despite Reliance Global Group's share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
To us, it seems Reliance Global Group currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.
There are also other vital risk factors to consider and we've discovered 5 warning signs for Reliance Global Group (4 don't sit too well with us!) that you should be aware of before investing here.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
About NasdaqCM:RELI
Reliance Global Group
Focuses in the acquisition and management of wholesale and retail insurance agencies in the United States.
Moderate and slightly overvalued.
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