StepStone Group (STEP) has put two clear signals in front of investors: a new share repurchase program of up to US$100 million and a broad round of senior promotions across its global platform.

Those moves come as the share price sits at US$46.73, with a 7 day share price return of 4.1% but a 90 day share price return decline of 29.7%, alongside a 3 year total shareholder return of about 2.1x and a 1 year total shareholder return decline of 15.1%, suggesting longer term holders have fared better than more recent entrants.

If StepStone's buyback and leadership changes have caught your attention, this can be a good moment to broaden your view and check out 20 top founder-led companies

With STEP trading at US$46.73 and sitting well below the average analyst price target of about US$77.43, the fresh US$100 million buyback raises a key question for you: is there real value here, or is the market already factoring in future growth?

Preferred Price to Sales Multiple of 2.1x: Is it justified?

On a P/S of 2.1x at a last close of $46.73, StepStone Group screens cheaper than many peers, although a separate fair ratio estimate points to a richer valuation than the numbers might initially suggest.

The P/S multiple compares the company’s market value to its revenue, which can be useful for businesses that are currently loss making or have volatile earnings. For StepStone Group, reported revenue stands at about $1.78b while the company remains unprofitable, so investors are effectively paying for its fee base and platform reach rather than current profits.

In that context, StepStone Group is described as good value when lined up against the broader US Capital Markets industry, where the average P/S is 3.3x, and against a peer group average of 4.5x. However, regression based fair value work suggests a P/S closer to 0.8x, a level that sits a long way below the current 2.1x and highlights how far the market could theoretically move if it were to converge on that relationship.

Result: Price-to-Sales of 2.1x (OVERVALUED)

However, you still have to weigh risks such as ongoing losses of about US$546.5m and recent share price declines, which can signal fragile investor confidence.

Next Steps

If this mix of buybacks, valuation signals and losses feels mixed, it is worth taking time now to weigh the risks yourself, starting with 3 important warning signs

Looking for more investment ideas?

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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.