As global markets evolve, investors increasingly focus on alternative asset managers for diversification and growth opportunities. This shift highlights companies that may have been previously overlooked, revealing untapped potential in their business models and financial strategies.
According to Goldman Sachs, StepStone Group Inc. (NASDAQ:STEP) is emerging as one of the fastest-growing players in private markets. Its earnings power remains underappreciated by investors.
Goldman analysts led by Alexander Blostein upgraded StepStone stock to Buy from Neutral, setting a $83 price forecast that implies a 37% upside.
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The analysts cited underappreciated growth in the firm's fast-expanding private wealth business and potential upside from a profit-share buyout.
The analyst said StepStone is poised to deliver one of the fastest earnings trajectories among alternative asset managers, forecasting a 24% normalized free-related earnings (FRE) compound annual growth rate through 2028.
The firm's private wealth franchise, which accounts for 17% of management fees, is rapidly expanding, with monthly flows averaging over $400 million.
Goldman expects Evergreen NAV to climb from $11 billion to $33 billion by 2027, driving a 67% management fee CAGR.
The bank also pointed to momentum in StepStone's institutional channel, supported by strong activity in the secondary market and an upcoming fundraising cycle, including a $7 billion private equity secondary fund and new vehicles in infrastructure, continuation, and direct lending. Meanwhile, about $29 billion of shadow assets under management should bolster separately managed accounts.
The analyst emphasized StepStone's earnings quality. With 74% of distributable earnings tied to FRE and 83% of revenues from recurring management fees, StepStone reduces its reliance on volatile performance and capital markets income.
Despite this profile, the stock trades at 24 times 2026 earnings, below the 31x average of comparable balance-sheet-light peers, implying a PEG ratio of 1.1 versus 1.5 for peers, the analyst said.
In August, the company reported first-quarter earnings of 40 cents per share, falling short of the analyst consensus of 42 cents and down 16.7% from 48 cents in the same period a year ago.
The quarterly revenue was $237.5 million, narrowly missing estimates of $238.9 million but marking a 7.4% increase from $221.2 million a year earlier.
Goldman Sachs said its earnings forecasts for StepStone run about 10% above consensus, with projected calendarized EPS of $2.14 in 2025, $2.50 in 2026, $3.19 in 2027, and $3.92 in 2028.
Price Action: STEP shares were trading higher by 8.95% to $65.51 at last check Thursday.
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