Take Care Before Jumping Onto Reliance Global Group, Inc. (NASDAQ:RELI) Even Though It's 26% Cheaper

Reliance Global Group, Inc. (NASDAQ:RELI) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. For any long-term shareholders, the last month ends a year to forget by locking in a 80% share price decline.

Following the heavy fall in price, given about half the companies operating in the United States' Insurance industry have price-to-sales ratios (or "P/S") above 1.1x, you may consider Reliance Global Group as an attractive investment with its 0.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Reliance Global Group

How Has Reliance Global Group Performed Recently?

Revenue has risen at a steady rate over the last year for Reliance Global Group, which is generally not a bad outcome. One possibility is that the P/S ratio is low because investors think this good revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Reliance Global Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Reliance Global Group will help you shine a light on its historical performance.

How Is Reliance Global Group's Revenue Growth Trending?

Reliance Global Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a decent 4.7% gain to the company's revenues. The latest three year period has also seen an excellent 55% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 5.3% shows it's noticeably more attractive.

In light of this, it's peculiar that Reliance Global Group's P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Reliance Global Group's P/S Mean For Investors?

Reliance Global Group's P/S has taken a dip along with its share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We're very surprised to see Reliance Global Group currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. Potential investors that are sceptical over continued revenue performance may be preventing the P/S ratio from matching previous strong performance. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

You need to take note of risks, for example - Reliance Global Group has 6 warning signs (and 5 which are a bit concerning) we think you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.