Why StepStone Group Stock Is Back on Investors’ Radar
StepStone Group (STEP) has swung back into focus after second quarter earnings on November 5 showed revenue of US$773.14 million and a narrower net loss alongside a reaffirmed quarterly dividend.
At a share price of US$47.45 after the earnings release, StepStone Group has seen a sharp 1 day share price return of 10.84% and a 7 day gain of 5.84%. However, the year to date share price return is still down 28.76% and the 1 year total shareholder return has declined 20.84%, while the 3 year total shareholder return of about 2x indicates that current volatility sits within a much stronger longer run journey.
Scan how other listed private markets and capital markets groups are reacting to similar earnings swings and dividend signals with our hand picked 39 high quality undervalued stocks.
The sharp StepStone Group rebound now leaves a live question for investors. Does this move better reflect the underlying private markets platform, or does it say more about sentiment snapping back after a tough year and today’s valuation debate?
Preferred Price-to-Sales of 1.7x for StepStone Group: Is It Justified?
Valuation on StepStone Group right now leans toward a premium story, with a P/S of 1.7x, a last close of $47.45, and signals that the shares trade above an estimated fair P/S level despite softer recent returns.
The P/S multiple looks at how much investors are paying for each dollar of StepStone Group's $2.33b in revenue, which can be useful for businesses that are currently loss making. Since StepStone Group is unprofitable on a net income basis, P/S offers a cleaner way to compare what the market is paying for its private markets fee stream and related activities versus peers where earnings are less consistent.
Analysts and model outputs send mixed messages here. On one side, StepStone Group is described as expensive versus an estimated fair P/S ratio of 0.8x, a level that would imply the market could move toward paying a lot less for each dollar of sales if sentiment cools. On the other side, the same 1.7x P/S is framed as good value compared with the broader US Capital Markets industry at 3.3x and a peer group average of 4.6x, suggesting investors are currently paying a materially lower revenue multiple than for many comparable platforms.
Explore the SWS fair ratio for StepStone Group.
Result: Price-to-Sales of 1.7x (ABOUT RIGHT)
Still, the StepStone Group story carries clear pressure points, including ongoing net losses of US$318.27 million and a 3.49% decline in annual revenue.
Find out about the key risks to this StepStone Group narrative.
Next Steps
Plenty in the StepStone Group story points in different directions, which is exactly why independent work matters most right now. Take a fresh look at the underlying data, weigh the concerns against the potential upsides, and then stress test that view against our breakdown of 1 key reward and 2 important warning signs
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