Shareholders of payment processing firm Square Inc. (NYSE:SQ) have had a pretty awesome year. SQ stock has turned in triple digit gains thus far in 2017 and its share price shot up more than 20% over the past three months. The firm has captured traders’ attention and its impressive growth and innovative future plans have made it a star in the fintech space.

However, after the massive Square stock rally it might be worth taking profits and waiting for a pullback to get back in. The rally we’ve seen over the past few months was too much too soon, and SQ stock is entering overvalued territory.

That’s not to say that the firm doesn’t have a bright future, but I think it’s worth waiting for SQ stock price to come back to earth before adding it to your portfolio.

The Bull Case for SQ Stock

There are a lot of great reasons to like Square as a company. For one, the firm is operating in the payments processing space, an industry with a tremendous amount of growth ahead. Square’s bread and butter is credit card payment processing for small businesses and while it might see like a market that’s been saturated, it’s not. Only about 15% of the world’s payments are made using credit or debit cards. The other 85% are cash and check transactions. That’s a huge amount of growth potential and Square’s niche products, which are geared specifically toward small- and medium-sized businesses, are likely to thrive as the market grows.

Then there’s Square’s impressive future plans. SQ stock is no longer just a play in the payment processing space, it’s a full-blown fintech stock. Square has been building out its ecosystem for small business owners to encompass everything they might need from accounting to loans — the latter being a key to SQ’s future success.

Since Square began doling out small business loans at supremely competitive rates, the firm has been very successful. Square Capital loaned $318 million in the past quarter — a 68% increase from the year before. Part of the reason the program has been so successful is that the company is able to offer low rates to customers with minimal risk to itself.

According to Square CFO Sarah Friar, the company’s loan loss rates were somewhere around 4% — that’s incredibly low, but Friar says it’s all thanks to the firm’s software algorithms. Because Square is managing the transactions for the merchants applying for a loan, the company has been able to use machine learning in order to evaluate the risk level for each merchant and create loans accordingly. Based on that success, Square is working on setting up its own bank, which will offer small business loans.

The Downside

So why am I so cautious about Square stock?

The explanation is simple — SQ stock has gotten very expensive for what it is and I’m not willing to pay that kind of a premium for potential alone. Square now trades at 134 times its forecasted earnings. Compare that to rival PayPal Inc. (NASDAQ:PYPL), which trades at a mere 38 times forward earnings.

Then there’s Square’s debt obligations. The firm has nearly $350 million worth of long-term debt and a staggering 49.73% debt-to-equity ratio. That’s massive when you compare it to peers in the same industry. PayPal has no long term debt at all, and Shopify Inc. (NYSE:SHOP) has a modest 1.30% debt-to-equity ratio.

The market has already been more than generous in valuing Square stock — at the very least, the firm’s impressive potential has been priced in — and that leaves a narrow gap for near-term growth.

The Bottom Line

I don’t dislike SQ stock. In fact, I think the company has some interesting projects and the stock has great long-term potential. However, the firm’s recent rally has pushed the share price much higher than I’d be willing to pay for a company that hasn’t turned a profit or established itself yet.

As my colleague Brent Kenwell pointed out, Square stock has a history of turning in big rallies and then pulling back to trade sideways for a few weeks. I don’t think it’s unrealistic to expect the same again, especially with the firm’s earnings announcement coming up on Nov. 11.

If you own SQ, you might want to consider taking profits; and if you’re planning to add the firm to your portfolio, it could be worth waiting for it to become a little more affordable.

As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.