Intuit's (INTU 1.20%) stock recently hit an all-time high after the financial software company's fourth-quarter numbers easily topped Wall Street's expectations.

Its revenue rose 83% annually to $1.82 billion, beating estimates by $250 million. Its adjusted EPS of $1.81, which marked a big improvement from its loss of $0.09 a year ago, also beat expectations by $0.69. Intuit's headline numbers were impressive, but does its stock still have room to run after advancing over 30% this year?

A delayed tax season brings back the bulls

Intuit generated 62% of its revenue from two main products in fiscal 2020: QBO (QuickBooks Online) and TTO (TurboTax Online). The rest of its revenue came from its other smaller platforms, including Mint and Turbo.

A seated woman uses a laptop and calculator.

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Intuit traditionally generates most of its revenue during the U.S. tax season in its fiscal third quarter. But this year, the pandemic-induced delay of the U.S. tax deadline (from April 15 to July 15) shifted that revenue from the third quarter to the fourth quarter.

As a result, Intuit's revenue grew just 1% annually to $5.9 billion in the first three quarters of 2020, and its adjusted EPS declined 11%. Business closures throughout the crisis exacerbated the pain.

But that revenue flowed back in the fourth quarter, as its consumer group revenue surged 859% annually to $710 million (due to a skewed year-over-year comparison) and its small business and self-employed revenue grew 16% to $1.05 billion.

Its total number of TurboTax customers also rose 11% annually, marking the platform's fastest growth rate in four years. Tax filings for stimulus checks amplified that growth, and gradual business reopenings brought customers back to QBO and its other accounting products.

A stable business with conservative expectations

For the full year, Intuit's revenue rose 13% to $7.7 billion, roughly matching its growth rate in 2019. Its non-GAAP operating margin expanded from 34% to 35% and its adjusted EPS grew 16%. Those growth rates actually exceeded Intuit's prior guidance -- which it withdrew in May -- for 10%-11% revenue growth and 11%-13% adjusted earnings growth.

A person uses accounting software on a personal computer.

Image source: Getty Images.

Intuit didn't provide any guidance for fiscal 2021, but CFO Michelle Clatterbuck outlined three possible scenarios during the conference call: (1) a continued economic recovery "reaching normalized growth" by the spring, (2) a "more gradual opening of the economy including ongoing headwinds from small business failures," or (3) a "choppy recovery and more than one wave of small business failures or shutdowns."

In the first scenario, Intuit expects its small business and self-employed revenue to grow by the high single-digits. In the second scenario, it anticipates mid-single digit growth. In the worst-case scenario, it expects the unit to generate flat to low-single-digit growth. Clatterbuck also warned that the consumer segment could face a "challenging comparison" to the accelerated demand from stimulus checks and business reopenings in the second half of fiscal 2020.

For now, Wall Street seems to favor the second scenario. Analysts expect Intuit's revenue and earnings to rise 8% and 7%, respectively, for the full year.

But mind the potential challenges

Intuit's greatest strength its its market dominance. TurboTax controlled over two-thirds of the online tax preparation market last year, according to ProPublica. Credit Karma, which Intuit agreed to buy earlier this year, will add another 3% to its market share. Intuit's closest competitor, H&R Block (HRB -1.34%), controlled less than 15% of the market. Intuit's expanding ecosystem of accounting, personal finance, payroll, and other software also locks in more customers and widens its moat.

But there are potential challenges on the horizon. Intuit and H&R Block both repeatedly lobbied against the IRS' creation of a free online tax filing system, but eventually agreed to provide free filing services for lower-income households. Intuit's number of free filers grew 20% annually during the fourth quarter, and that growth could gradually reduce its consumer segment's operating margin -- which declined by a percentage point to 62% in 2020.

Intuit's three scenarios for 2021 also don't include any predictions for a second wave of COVID-19 infections. If the COVID-19 situation worsens in the U.S. and forces businesses to close again, analysts will likely need to lower their middle-of-the-road expectations for Intuit next year.

Not enough upside potential in a frothy market

Intuit's business is built to last for decades, but its stock looks frothy at over 40 times forward earnings. Its tiny forward dividend yield of 0.6% also won't attract any serious income investors. The bulls might believe Intuit's stability justifies its premium valuation, but there are plenty of defensive plays that trade at lower multiples and pay higher dividends. Investors should stick with those stocks for now instead of chasing Intuit at its all-time highs.