Recent performance snapshot and what triggered a closer look

StepStone Group (STEP) has come onto investors’ radar after a mixed stretch in its stock performance, with shares down over the past week and month but showing a gain over the past 3 months.

At a share price of US$49.31, StepStone Group has seen short term share price momentum fade, with the 7 day and 30 day share price returns down 8.24% and 6.51% respectively. At the same time, the 3 year total shareholder return of 129.63% reflects a much stronger longer term picture.

If you are weighing StepStone’s recent pullback against longer term gains, this can be a good moment to see what else is moving and uncover 20 top founder-led companies

With StepStone’s shares pulling back this year, a recent loss and a value score of 2, plus a sizable gap to the US$72.50 analyst target, should you see hidden upside here or assume the market is already pricing in future growth?

Preferred Price-to-Sales of 2x: Is it justified?

StepStone Group trades on a P/S of 2x, and with the share price at $49.31, that level screens as expensive relative to its own fair ratio benchmark.

The P/S multiple compares the company’s market value to its revenue and is often used for asset managers and capital markets stocks when earnings are volatile or negative. For StepStone, this is relevant because the company is currently unprofitable, reported a loss of $535.808m on revenue of $1.994b, and its value score is low at 2.

On one side, StepStone screens as good value versus the broader US Capital Markets industry, where the average P/S is 3.6x and the peer group average sits around 2.8x. On the other side, the estimated fair P/S ratio for StepStone is 0.9x, which is far below the current 2x level and suggests a valuation that might be out of line with where the multiple could reset if pricing moved closer to that fair ratio benchmark.

Result: Price-to-Sales of 2x (OVERVALUED)

However, the recent net loss of $535.808m and revenue growth that declined 4.59%, alongside a value score of 2, could challenge the bullish valuation story.

Next Steps

If this leaves you unsure whether the current setup feels comfortable or stretched, take a closer look at the data and move quickly to shape your own view with 2 important warning signs

Looking for more investment ideas?

Before you move on, give yourself the chance to find a few fresh candidates that could complement or even challenge your current thinking on StepStone.

• Target potential value opportunities early by scanning 46 high quality undervalued stocks that combine quality fundamentals with pricing that may warrant a closer look.
• Strengthen your portfolio core by focusing on companies highlighted in the solid balance sheet and fundamentals stocks screener (46 results) that prioritise financial resilience.
• Stay ahead of the crowd by reviewing the screener containing 22 high quality undiscovered gems that the market may not be paying full attention to yet.

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.