A few weeks ago, I wrote that investors who are considering adding Square Inc (NYSE:SQ) to their portfolios should hold off because the share price is simply too high for what you’re buying. Since that time, SQ stock has gained more than 20% and several of my colleagues are saying that the share price is likely to keep running higher.

However, I stand by my advice — the SQ stock price looks ready to collapse.

Maybe not today, and perhaps not this year, but it’s coming. If I owned Square, I’d be taking profits right now and although I think Square is working on some very exciting stuff, especially in the lending space, I’ll be waiting on the sidelines for a meaningful pullback before I consider taking a position.

Why Is SQ So Great?

One of the biggest reasons SQ has had such an impressive run over the past year is that the company’s mission is very promising. As Josh Enomoto put it, “What Square does is to give the little guys the same tools that the big guys leverage.”

It’s a concept that’s working. Square focuses on facilitating payment processing for small and medium sized businesses, a space that has a huge amount of room for growth. Small businesses that operate out of independent stalls or even someone’s home were in need of a way to process credit and debit card payments and Square has stepped in to fill that need.

Not only is the company working in payment processing, but SQ is also setting up a lending arm and it has even been working on a delivery service for restaurants.

The Problem With SQ Stock

However, at the moment, SQ gets the majority of its revenue from the payment processing space. 87% of Square’s revenue comes from transaction-based payments, which is part of the worry about SQ stock’s future. Any time you are so heavily dependent on a single source of revenue, there’s a lot of potential for the market to panic.

Any disruptions in the payment-processing space have the potential to significantly impact not only SQ stock, but Square as a business. While it’s true that SQ has been working to diversify its gross profit and that subscription-based revenue has been on the rise, subscription revenue is not nearly a large enough part of Square’s business to be considered a viable lifeline in the event that transaction-based payments lose steam.

Speaking of losing steam, there’s an argument to be made that Square isn’t living up to its hype already. SQ stock is expensive for what you’re getting.

Square trades at 155 times its forecasted earnings. Compare that to the average for the S&P 500 of 20.57 and you can see that great results have been more than priced in for SQ stock. Not only does SQ have an inflated share price, but the firm has a few financial issues as well.

Square’s $354 million debt load translates into a debt to equity ratio of 48.33%. That’s high. Competitor PayPal Holdings Inc (NASDAQ:PYPL) has no long-term debt and Shopify Inc (US) (NYSE:SHOP) has a debt to equity ratio if just 1.55%.

Those figures don’t inspire a ton of confidence and Square’s third-quarter earnings report was similarly underwhelming. Gross payment volume and transaction-based revenue growth slowed. Subscription and services revenue growth was also sluggish as was margin expansion.

Luke Lango says the slowdown in pretty much all but one key metric “isn’t all that bad.” I’d have to respectfully disagree. You want to see stellar growth from a stock that’s priced to give you stellar growth. These minimal slowdowns could be the beginning of something greater, or they could eventually cause the market to turn on SQ stock.

The Bottom Line

Lango may be right. After all, what does a one percentage point decline matter when you’re talking about growth rates that have been able to surpass 30% consistently?

But it doesn’t really matter whether the sluggish growth indicates a problem for the future or not — what matters is how the market reacts to it. After Q3 results, SQ stock fell initially as investors mulled over how they felt about the lackluster performance. The share price eventually resumed its upward trajectory, but will Mr. Market be so forgiving in the quarter to come?

SQ stock is in overbought territory and all it takes is one catalyst to burst that bubble. If you’re looking to add Square to your portfolio, it might be worth waiting for a pullback before you do so because the stock is getting riskier and riskier as it continues to rise.

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