StepStone Group (STEP): Valuation Insights Following Launch of Private Credit Benchmarks with Kroll

If you’re debating what to do with StepStone Group (STEP) after recent headlines, you’re not alone. The company has just teamed up with Kroll to unveil the Kroll StepStone Private Credit Benchmarks, a first-of-its-kind tool designed to bring sharper insights to a traditionally opaque sector. For investors attuned to the importance of market transparency, this move could have big implications for how private credit is valued and understood.

This new benchmark initiative appears to be resonating with the market. Over the past year, StepStone Group has delivered a 22% total return, with momentum picking up in recent months. Shares are up almost 9% over the past three months, and 5% for the year to date. This rally isn’t happening in a vacuum. Alongside annual revenue growth of 5%, the recent launch may be fueling optimism about StepStone’s long-term positioning in private markets.

But with the shares climbing on news and underlying earnings still catching up, is StepStone Group undervalued after this run, or is the market simply pricing in years of future growth today?

Price-to-Sales of 3.6x: Is it justified?

StepStone Group appears to be good value based on its price-to-sales ratio of 3.6x, which is lower than both the US Capital Markets industry average (3.9x) and the peer average (6.1x). However, when measured against its estimated fair price-to-sales ratio of 1.6x, STEP looks relatively expensive.

The price-to-sales multiple compares a company's market value to its revenues. This provides a useful indicator for investors when profits are inconsistent or negative, as is the case for StepStone Group. In the capital markets sector, this metric helps benchmark how the business is valued relative to peers and the broader industry, taking growth and profitability into account.

This suggests that while StepStone trades at a discount to its immediate competition, the premium over its intrinsic fair value means investors may be pricing in future growth and margin improvement that have yet to materialize. The market appears cautiously optimistic, but it is also factoring in expectations that may be challenging to deliver given recent profitability trends.

Result: Fair Value of $9.37 (OVERVALUED)

See our latest analysis for StepStone Group.

However, slower revenue growth or continued negative net income could quickly challenge the optimism that is fueling StepStone’s recent rally.

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

Another View: SWS DCF Model Puts the Spotlight on Value

Looking at StepStone Group through the lens of our DCF model presents a very different picture. This approach suggests the shares are overvalued, which challenges the optimism built into current market prices. Will this gap eventually close?

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 have a different perspective or want to dig deeper into StepStone Group’s data, you can craft your own take on the company in just a few minutes. 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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