StepStone Group (STEP): Valuation Insights After Strong STPEX Fund Launch and Capital Raise

StepStone Group (STEP) recently rolled out its new evergreen interval fund, STPEX, raising more than $750 million since its September launch. The fund’s wide availability and structure are drawing attention from both individual and institutional investors.

See our latest analysis for StepStone Group.

Following the STPEX launch, StepStone Group’s momentum has been mixed. The share price was recently at $60.53, with a year-to-date share price return of 3.1%. However, its one-year total shareholder return of -7.6% hints at some caution among investors lately, even as the company boasts a striking 116.6% return over the past three years. In other words, despite short-term volatility, the long-term view remains impressive for those who stuck with StepStone through earlier cycles.

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With shares trading well below analyst targets while recent returns remain muted, investors now face a key question: Is this an undervalued entry point into StepStone Group, or has the market already factored in its future growth?

Price-to-Sales of 3.1x: Is it justified?

StepStone Group is currently trading at a price-to-sales ratio of 3.1x, which is well above what is implied as fair value for the company. This high valuation stands out, given that the last close was $60.53 and the stock is sitting below its analyst target price.

The price-to-sales multiple measures how much investors are willing to pay for each dollar of the company’s revenue. This is a common approach for financial services and investment firms with cyclical or volatile earnings. In this case, the market appears to be pricing in higher optimism for revenue or strategic opportunities. However, it is worthwhile to consider whether that premium is truly justified for StepStone’s unique business model.

Compared to the industry, StepStone’s 3.1x multiple actually looks favorable against the US Capital Markets average of 3.6x, indicating some relative value. However, the estimated fair price-to-sales ratio is just 0.9x, meaning the current premium could be hard to justify if revenue growth does not accelerate substantially.

Explore the SWS fair ratio for StepStone Group

Result: Preferred multiple of price-to-sales ratio 3.1x (OVERVALUED)

However, StepStone’s modest annual revenue growth and recent net losses highlight ongoing risks that could undermine its current valuation premium.

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

Build Your Own StepStone Group Narrative

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A great starting point for your StepStone Group research is our analysis highlighting 1 key reward and 2 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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