StepStone Group (STEP) is back in focus after quarterly results came in ahead of market expectations, supported by strong fee related earnings, record Private Wealth subscriptions, and growing partnerships and product expansion.

The latest earnings surprise appears to have checked a recent pullback, with the 1 day share price return of 5.5% partly offsetting a 30 day share price return decline of 13.4%, while a 3 year total shareholder return of around 7x suggests longer term momentum has been strong.

If this update on private markets is on your radar, it could be a good moment to widen your watchlist and look at 22 top founder-led companies as potential next ideas.

With the shares down over the past month and trading about 31% below the average analyst price target, yet backed by record fundraising and fee growth, the key question is whether there is still a buying opportunity here or whether the market is already pricing in future growth.

Preferred Price-to-Sales of 2.8x: Is it justified?

StepStone Group currently trades on a P/S of 2.8x, which screens as expensive against its own fair P/S estimate but cheaper than many capital markets peers.

The P/S multiple compares the company’s market value with its revenue, so it is a simple way to see how much investors are paying for each dollar of fees and related income. For an asset manager with currently negative net income but meaningful fee revenue of $1.78b, this can matter more than earnings based metrics.

According to the fair ratio estimate, a P/S closer to 0.9x would be more in line with what the SWS model indicates the business might justify over time. This points to a richer valuation at today’s 2.8x level. Yet versus the broader US Capital Markets industry at 3.7x and a peer average of 3.6x, the stock trades at a discount, so the market is assigning it a lower sales multiple than many competitors even while it looks expensive relative to that 0.9x fair level.

Result: Preferred multiple of Price-to-Sales of 2.8x (OVERVALUED)

However, you still need to weigh risks such as StepStone’s US$546.5m net loss and any cooling in fundraising appetite across its broad private markets focus.

Build Your Own StepStone Group Narrative

If you see the data differently or simply want to stress test these assumptions with your own inputs, you can build a personalised view of StepStone’s story in just a few minutes and 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.