StepStone Group (STEP) is back in focus after completing fundraising for its StepStone Secondaries Infrastructure Fund and related accounts, securing US$1.7b in commitments with about half already deployed across 26 infrastructure secondary deals.

At a share price of US$50.32, StepStone Group has seen a strong 30 day share price return of 17.02%, even though the share price return year to date is down 24.46% and the 1 year total shareholder return is down 16.50%. However, the 3 year total shareholder return of 76.81% points to much stronger longer term momentum.

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After a sharp 30 day rebound but weaker year to date and 1 year results, StepStone Group now asks a simple question of investors: Does today’s price still offer enough upside for the risk you are taking on?

Preferred Price-to-Sales Multiple of 2.1x, Is it justified?

For a stock like StepStone Group, the current valuation is often viewed through its P/S ratio of 2.1x. At the last close of $50.32, that multiple screens as expensive compared to an estimated fair P/S of 0.9x, even though it looks cheaper than many peers.

The P/S ratio compares the value the market places on StepStone Group to its revenue base of about $2.0b. It is a common way to assess companies where earnings are volatile or currently loss making, since it sidesteps profit swings and focuses on sales. In this case, the key question for you is whether the revenue profile and business model justify paying more than the fair P/S level implied by the data.

Against the broader US Capital Markets industry, StepStone Group trades on a lower P/S ratio than the 3.8x industry average and below the peer average of 4.9x. That points to a discount relative to similar companies, even though the fair P/S estimate of 0.9x suggests the multiple could move lower if the market were to fully align with that regression based level. Explore the SWS fair ratio for StepStone Group

Result: Price-to-Sales ratio of 2.1x (OVERVALUED)

However, there are clear risks for StepStone Group if fundraising momentum slows, or if its broad global exposure and reported net loss of US$613.2m weigh more heavily on sentiment.

Next Steps

If this StepStone Group story feels finely balanced for you, now is the time to look at the details yourself and weigh the trade off. A good place to start is with the 2 important warning signs.

Looking for more StepStone Group style investment ideas?

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• Hunt for future standouts before the crowd catches on by scanning a 19 high quality undiscovered gems that highlights quality stocks still under most investors radar.

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.