"It's inevitable that he will leave one day but hopefully that will be later rather than sooner," Donaldson, who has struck five goals for Hibs this season, told the Edinburgh Evening News.
"He still has a bit to learn but he has ability, no doubt about that. The longer we can hold onto him the better but I think everybody knows that a talent like Steven's is bound to get interest.
"He still has a lot to learn but he's already a very good player. He's made a lot of appearances in the Premier League but the fact he's still young means he's only going to get better.
"He's definitely got the potential to go far as he's only 20 or 21 and he has a lot of big games ahead of him. He has definitely got the ability to take the step up and he just has to work out when the right time is.
"He has a lot to his game as he can hold the ball up and be a target man, can score goals and can even play on the wing.
"As long as he keeps his head down, though, then there is no doubt that good things will come."