Reliance Global Holdings Limited (HKG:723) shares have retraced a considerable 64% in the last month, reversing a fair amount of their solid recent performance. Looking at the bigger picture, even after this poor month the stock is up 86% in the last year.

Even after such a large drop in price, there still wouldn't be many who think Reliance Global Holdings' price-to-sales (or "P/S") ratio of 0.7x is worth a mention when it essentially matches the median P/S in Hong Kong's Forestry industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does Reliance Global Holdings' Recent Performance Look Like?

As an illustration, revenue has deteriorated at Reliance Global Holdings over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Reliance Global Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Reliance Global Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 40% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 64% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's an unpleasant look.

With this in mind, we find it worrying that Reliance Global Holdings' P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

The Final Word

Reliance Global Holdings' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We find it unexpected that Reliance Global Holdings trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

Plus, you should also learn about these 4 warning signs we've spotted with Reliance Global Holdings (including 2 which make us uncomfortable).

If these risks are making you reconsider your opinion on Reliance Global Holdings, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.