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On Wednesday, Goldman Sachs analyst Alexander Blostein increased the price target for StepStone Group (NASDAQ:STEP) shares to $63 from the previous target of $57, while maintaining a Neutral rating on the stock. Currently trading at $59.30, InvestingPro analysis suggests the stock is slightly overvalued at current levels. The adjustment follows StepStone’s announcement of a significant rise in earnings per share (EPS) for the fourth fiscal quarter of 2025, which exceeded both Goldman Sachs’ and consensus estimates.
StepStone Group reported a robust EPS of $0.68 for FY4Q25, a sharp increase from the $0.44 reported in the previous quarter. This performance was significantly higher than the anticipated $0.40 by Goldman Sachs and the consensus estimate of $0.44. The impressive results were attributed to a record fee-related earnings (FRE) of $94 million and a strong net performance fee contribution of $42 million. According to InvestingPro data, the company has shown remarkable revenue growth of 65% over the last twelve months, with analysts expecting continued profitability this year.
The company’s management fee revenue saw a boost from $15.7 million of retroactive fees, which was a major factor in surpassing expectations for the quarter and led to a healthy FRE margin of 44%. Goldman Sachs noted that, even excluding the impact of retroactive and one-time advisory fees, management’s expectation for an approximately 37% FRE margin is promising and above the previously expected 35%.
Growth in fee-earning assets under management (AUM) was also highlighted, with an increase to $121 billion, up 6% quarter over quarter. This growth was driven by record private wealth subscriptions totaling $1.2 billion and firmwide gross inflows of $9.9 billion. Looking forward, Goldman Sachs anticipates high-teen growth in management fees, supported by strong fundraising momentum across various strategies, a doubling of AUM in the Wealth segment year over year to $8.2 billion, and over $25 billion of undeployed capital providing visibility into near-term fee growth.
Despite expectations of a moderation in margin due to the peak driven by retroactive fees in the quarter, the normalized FRE margin of around 37% is seen to have long-term upside. This is due to potential operating leverage from scaling within the Wealth segment and platform investments. InvestingPro subscribers have access to 7 additional key insights about StepStone Group, including detailed financial health scores and comprehensive valuation metrics. The company maintains a "Fair" overall financial health score of 2.14, with particularly strong momentum metrics.
In light of these developments, Goldman Sachs revised its calendar 2025/26/27 EPS estimates for StepStone Group to $2.18, $2.35, and $2.74, up from $1.83, $2.15, and $2.52 respectively. The new 12-month sum-of-the-parts (SOTP) price target reflects a mix shift in FRE, a lower non-controlling interest (NCI) burden, and improved visibility on AUM growth. The current stock price trades at approximately 27 times the adjusted 2025 earnings before interest and taxes (DE), aligning closely with the three-year average next twelve months price to DE ratio of 27-28 times, with an approximate 6% upside to the new target price.
In other recent news, StepStone Group reported impressive financial results for the first quarter of fiscal 2025, with after-tax net income per share reaching $0.68, surpassing both Bloomberg’s consensus and JPMorgan’s estimates. The company achieved management fees from commingled funds totaling $125 million, exceeding expectations. StepStone’s fee-related earnings were reported at $94 million, with a margin of 44%, setting a record since the company went public. JPMorgan analyst Kenneth B. Worthington raised the price target for StepStone’s stock to $68, maintaining an Overweight rating, highlighting the company’s strong performance and growth potential.
Meanwhile, Step Energy Services faced a challenging fourth quarter in 2024, with revenue dropping significantly to $147 million from $256 million in the previous quarter. Despite this, the company achieved a slight increase in full-year revenue to $955 million. Step Energy reported a net loss of $45 million for the fourth quarter but remains cautiously optimistic about 2025, especially in the Canadian market. The company has made technological advances, including dual fuel fracturing capacity and new coiled tubing records, which are expected to support future growth. Step Energy has also significantly reduced its debt since 2018, with plans for further reduction.
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