StepStone Group (STEP) drew fresh attention after announcing that its SPI Deal Benchmarking solution, developed with PitchBook, is now generally available to investors, fund managers, and service providers on the PitchBook and SPI platforms.

Despite launching SPI Deal Benchmarking, StepStone Group’s short term share price momentum has softened, with the 30 day share price return down 15.41% and the year to date share price return down 31.75%, while the 3 year total shareholder return remains very large at about 2x.

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With StepStone Group shares down 31.75% year to date, trading at $45.46 against an average analyst price target of $72.50, you have to ask: is this a reset that creates an opening, or is the market already looking through to future growth?

Price-to-Sales of 1.8x: Is it justified?

On a P/S basis, StepStone Group trades at 1.8x sales, which is lower than both peers and the broader US Capital Markets industry, even after the recent share price pullback.

The P/S ratio compares the company’s market value to its revenue and is often used for businesses that are unprofitable, like StepStone Group, where earnings do not yet provide a clear guide. A lower P/S relative to similar companies can suggest the market is assigning a more cautious value to each dollar of revenue.

Here, StepStone Group’s P/S of 1.8x sits below the peer average of 2.9x and well below the US Capital Markets industry average of 3.7x. This points to a sizeable discount compared with others in the space. However, relative to an estimated fair P/S ratio of 0.9x, the current multiple is roughly twice the level that regression analysis implies could be more in line with fundamentals. This suggests the market may still be pricing the stock above that fair ratio anchor.

Result: Price-to-Sales of 1.8x (OVERVALUED)

However, StepStone Group still faces meaningful risks, including an annual revenue decline of 4.6% and a recent net loss of $535.808 million that could pressure sentiment.

Next Steps

If this more cautious tone around StepStone Group gives you pause, treat it as a prompt to review the numbers for yourself and move quickly to form an independent view using the 2 important warning signs

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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.