Contrasting StepStone Group (NASDAQ:STEP) and Lazard (NYSE:LAZ)

Lazard (NYSE:LAZ) and StepStone Group (NASDAQ:STEP) are both mid-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Risk & Volatility

Lazard has a beta of 1.47, suggesting that its share price is 47% more volatile than the S&P 500. Comparatively, StepStone Group has a beta of 1.29, suggesting that its share price is 29% more volatile than the S&P 500.

Insider & Institutional Ownership

54.8% of Lazard shares are owned by institutional investors. Comparatively, 55.5% of StepStone Group shares are owned by institutional investors. 0.9% of Lazard shares are owned by company insiders. Comparatively, 15.7% of StepStone Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Lazard pays an annual dividend of $2.00 per share and has a dividend yield of 5.1%. StepStone Group pays an annual dividend of $1.32 per share and has a dividend yield of 3.0%. Lazard pays out 121.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. StepStone Group pays out -17.1% of its earnings in the form of a dividend. StepStone Group has increased its dividend for 3 consecutive years.

Profitability

This table compares Lazard and StepStone Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lazard	5.55%	20.76%	4.16%
StepStone Group	-30.53%	43.38%	4.40%

Analyst Recommendations

This is a summary of recent recommendations for Lazard and StepStone Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lazard	3	3	4	0	2.10
StepStone Group	1	2	8	0	2.64

Lazard currently has a consensus target price of $46.50, suggesting a potential upside of 17.54%. StepStone Group has a consensus target price of $66.11, suggesting a potential upside of 48.66%. Given StepStone Group’s stronger consensus rating and higher probable upside, analysts clearly believe StepStone Group is more favorable than Lazard.

Valuation and Earnings

This table compares Lazard and StepStone Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lazard	$3.10 billion	1.40	$236.83 million	$1.65	23.98
StepStone Group	$1.99 billion	2.66	-$535.81 million	($7.72)	-5.76

Lazard has higher revenue and earnings than StepStone Group. StepStone Group is trading at a lower price-to-earnings ratio than Lazard, indicating that it is currently the more affordable of the two stocks.

Summary

StepStone Group beats Lazard on 10 of the 17 factors compared between the two stocks.

About Lazard

Lazard, Inc., together with its subsidiaries, operates as a financial advisory and asset management firm in North and South America, Europe, the Middle East, Asia, and Australia. It operates in two segments, Financial Advisory and Asset Management. The Financial Advisory segment offers financial advisory services, such as mergers and acquisitions, capital markets, shareholder, sovereign, geopolitical advisory, and other strategic advisory services, as well as restructuring and liability management, and capital raising and placement services. This segment offers its services to corporate, partnership, institutional, government, sovereign, and individual clients to various industry areas, including consumers, financial institutions, healthcare and life sciences, industrials, power and energy/infrastructure, real estate, technology, telecommunication, and media and entertainment. The Asset Management segment offers a range of investment solutions; investment and wealth management services in equity and fixed income strategies; asset allocation strategies; and alternative investments and private equity funds to corporations, public funds, sovereign entities, endowments and foundations, labor funds, financial intermediaries, and private clients. Lazard, Inc. was incorporated in 1848 and is headquartered in New York, New York.

About StepStone Group

StepStone Group Inc. is a private equity and venture capital firm specializing in direct, fund of funds, secondary direct, and secondary indirect investments. For direct investment, it seeks to invest in private debt, venture debt, incubation, mezzanine, distressed/vulture, seed/startup, early venture, mid venture, late venture, emerging growth, later stage, turnaround, growth capital, industry consolidation, recapitalization, buyout investments in mature and middle market companies. It prefers to invest in natural resources, technology, healthcare, services, materials, manufacturing, consumer durables, apparel, hotels, restaurants and leisure, media, retailing, power, utilities consumer staples, financials, telecommunication services, clean energy/renewables, transport, social, natural capital, infrastructure, corporate, real estate, credit and real asset. The firm invests globally with a focus on United States, North America, Europe, Asia, Latin America, Middle East, Africa, Brazil, Mexico, Argentina, Colombia, New Zealand, China, India, Korea, Japan, Taiwan, and Australia region. The firm invests between 5% and 40% in emerging markets. For fund of fund investment, it seeks to invest in private equity funds, venture capital funds, Special situation funds, Real estate funds, Infrastructure funds, mezzanine funds, and turnaround/distressed funds. It considers investments in both domestic and international funds. It also seeks to make co-investments and follow-on investments and considers partial interests in funds. StepStone Group Inc. was founded in 2007 and is based in New York, New York with additional offices across North America, South America, Europe, Australia and Asia.