A Look at StepStone Group’s (STEP) Valuation Following Goldman Sachs Upgrade on Private Wealth Growth

Thinking about what to do with StepStone Group (STEP) stock? You are not alone. The recent upgrade from Goldman Sachs, which cited the company’s swift expansion in its private wealth arm and sizable projected fee-related earnings growth, has brought fresh attention. The analyst described StepStone’s outlook as one of the fastest-growing among alternative asset managers, driven by fundraising momentum and growing earnings. This has made it a point of discussion for anyone considering their next move.

This isn’t the first tailwind for StepStone Group lately. The stock leapt 7.8% following the upgrade and its annual return tops 21%, with gains outpacing 8% over the past month and more than 20% in the past quarter. Adding to the story, StepStone recently amended its corporate governance to clarify officer liability, which is another sign of change, while its earnings track record and fundraising pipeline have fueled a feeling that momentum is building both operationally and in its share price.

So after this run, are markets leaving more upside on the table, or is everyone already paying up for StepStone’s growth story?

Price-to-Sales of 3.9x: Is it justified?

StepStone Group is currently valued at a price-to-sales (P/S) ratio of 3.9x, which positions it below the peer average of 6.1x and slightly below the broader US Capital Markets industry average of 4.1x. This suggests the market is pricing StepStone at a discount relative to its sector on this specific metric.

The price-to-sales ratio measures how much investors are willing to pay per dollar of sales. It is particularly useful for companies where earnings may be volatile or negative, as is currently the case for StepStone Group. For asset managers and financial service firms that experience fluctuating profits, the P/S ratio helps investors compare companies regardless of their current profitability.

While StepStone appears to be undervalued compared to its peers on sales, investors should note that its sales multiple is higher than its estimated fair value and it remains unprofitable. The discount may signal market skepticism about the company’s ability to translate sales into profits in the near term.

Result: Fair Value of $9.27 (OVERVALUED)

See our latest analysis for StepStone Group.

However, lingering losses and uncertainty around StepStone’s ability to turn sales growth into profits still raise concerns about the company’s near-term trajectory.

Find out about the key risks to this StepStone Group narrative.

Another View: What Does the SWS DCF Model Say?

While StepStone Group looks discounted on sales compared to its sector, our DCF model arrives at a sharply different result. This suggests markets may be overvaluing the long-term cash flow potential. Which method will prove closer to reality?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding StepStone Group to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own StepStone Group Narrative

If you see things differently or prefer hands-on insight, you can quickly dive into the numbers and develop your own perspective. Do it your way.

A great starting point for your StepStone Group research is our analysis highlighting 3 important warning signs that could impact your investment decision.

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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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