A Piece Of The Puzzle Missing From Reliance Global Group, Inc.'s (NASDAQ:RELI) 51% Share Price Climb
Reliance Global Group, Inc. (NASDAQ:RELI) shareholders are no doubt pleased to see that the share price has bounced 51% in the last month, although it is still struggling to make up recently lost ground. But the last month did very little to improve the 91% share price decline over the last year.
In spite of the firm bounce in price, it would still be understandable if you think Reliance Global Group is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in the United States' Insurance industry have P/S ratios above 0.9x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
See 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. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
Keen to find out how analysts think Reliance Global Group's future stacks up against the industry? In that case, our free report is a great place to start.
How Is Reliance Global Group's Revenue Growth Trending?
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.
If we review the last year of revenue growth, the company posted a terrific increase of 73%. The strong recent performance means it was also able to grow revenue by 276% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.
Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 23% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 6.8%, which is noticeably less 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 are doubtful of the forecasts and have been accepting significantly lower selling prices.
What We Can Learn From Reliance Global Group's P/S?
Despite Reliance Global Group's share price climbing recently, its P/S still lags most other companies. 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.
Reliance Global Group's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.
Before you take the next step, you should know about the 5 warning signs for Reliance Global Group (4 are a bit unpleasant!) that we have uncovered.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.
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