Shares of PayPal (NASDAQ:PYPL) have surged more than 60% this year, fueled by a streak of double-digit sales and earnings growth at the online payments platform provider. But with the stock now hovering near all-time highs, is it too late for investors to jump aboard? Let's examine PayPal's growth rates, tailwinds, headwinds, and valuation to find out.

How fast is PayPal growing?

PayPal's total number of active customer accounts rose 12% annually to 210 million last quarter. Total transactions grew 23% to 1.8 billion, and each active account logged an average of 32.3 transactions over the past 12 months -- a 10% jump from the prior year.

A smartphone displaying a shopping cart icon.

Image source: Getty Images.

Total payment volume (TPV) across its network rose 23% year over year, or 26% on a constant currency basis. Total revenue rose 18% to $3.14 billion, or 20% excluding currency impacts, while its GAAP and non-GAAP earnings both grew 27%.

Analysts expect PayPal's revenue and earnings to respectively rise 19% and 23% this year as its platform gains more users and transaction volume keeps rising.

Plenty of tailwinds

PayPal has expanded its payment platform beyond email, web payments, and its former parent eBay with several big acquisitions. Those purchases included online payments platform provider Braintree, which owns the peer-to-peer payments app Venmo; the mobile wallet start-up Paydiant; the overseas remittance provider Xoom; and the cloud-based multichannel bill payment processor TIO Networks.

The purchase of Venmo widened PayPal's moat against social payments challengers like Snap and Square's Snapcash. Integrating Xoom's network reinforced its strength in overseas markets, purchasing Paydiant let it handle transactions for big companies like Capital One, and TIO enabled it to handle telco and utility payments.

PayPal's mobile app.

Image source: Google Play.

All these moves ensured that PayPal remained the 800-pound gorilla of the mobile payments market. That's why a long list of companies -- including Baidu (NASDAQ:BIDU), Visa, and Bank of America -- all recently signed payment partnerships with PayPal instead of directly competing against it.

Research firm Allied Market Research believes that the global mobile payments market will grow at a compound annual growth rate of 33.4% between 2016 and 2022. That's great news for PayPal -- as long as it maintains its market-leading position in online payments.

But mind the headwinds

The biggest near-term headwind for PayPal is Apple (NASDAQ:AAPL) Pay. Apple heavily promotes the use of the platform on iPhones and Apple Watches. In response, many vendors installed NFC terminals to accept Apple Pay.

Apple hasn't disclosed exact user or revenue growth figures for Apple Pay yet. But during Apple's first-quarter conference call last January, CEO Tim Cook declared that the number of Apple Pay users tripled over the past year, the platform processed "billions" of transactions during the quarter, and that its transaction volume had surged 500% annually. Juniper Research claims that Apple Pay will hit 86 million global users this year, up from 45 million in 2016.

Other major rivals include Tencent's WeChat Pay and Alibaba's Alipay, the preferred mobile payment platforms in China. Both companies have been expanding their platforms overseas, and it's unlikely that PayPal's recent alliance with Baidu will slow them down. Facebook's integration of mobile payments into Messenger could also eventually threaten Venmo.

The valuation is worrisome

I'm not terribly concerned about Apple Pay or other rivals knocking out PayPal, since it clearly has a first-mover advantage and a wide multiplatform lead. I'm more concerned about the stock's valuation, which indicates that too much optimism is already baked in.

PayPal trades at 52 times earnings, which is much higher than the industry average P/E of 24 for credit services companies. Its forward P/E of 30 looks cheaper, but it still represents a premium to its projected earnings growth rate.

The verdict: Don't buy PayPal (for now)

I like PayPal's business model because it has sustainable long-term advantages. But I think that its stock has gotten ahead of itself, and its lofty valuation could leave it vulnerable to a big sell-off. Therefore, I think investors should wait for a pullback before buying this promising long-term play on the mobile payments market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.