Financial services and digital payments company Square (NYSE:SQ) has been on a rapid growth trajectory since its IPO, and that points to its mega-cap potential. With its market cap already exceeding $100 billion, some investors are starting to wonder if it has the potential to be one of the very select group of stock giants that reach a $1 trillion market capitalization.

With such discussions going on, it would be well advised for current stockholders and prospective buyers to take a closer look at the company's growth and its business model. If it's growing as fast as some are speculating, some are beginning to ask if this fintech stock can be a trillion-dollar company by 2030.

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Image source: Getty Images.

Where Square stands

As of the time of this writing, Square stock trades near the $245 per share level. That gives it a market cap of just above $112 billion. To reach the $1 trillion level, it has to rise eightfold, which amounts to doubling its value three times. Over nine years, this would mean an average increase of approximately 26% per year.

So far, Square's growth has substantially exceeded that rate. Since its IPO in 2015, it has risen nearly 1,800% in slightly less than six years, including an increase of just above 105% over the last year. However, in 2021, Square's stock price has risen by only about 13%.

SQ Chart

SQ data by YCharts

The company's current valuation may explain the slowing growth. The stock price takes its P/E ratio to 350, representing a massive climb from the 75 P/E ratio in March 2020. It has also risen far above PayPal's (NASDAQ:PYPL) multiple of just under 70.

Can it still climb?

That valuation is likely helped by revenue, which surged 266% from year-ago levels in the first quarter of 2021. Nonetheless, accounting rules requiring Square to log Bitcoin payment volumes skewed these numbers. Hence, the increase came in at 44% when excluding the cryptocurrency, taking revenue to $1.55 billion.

Moreover, quarterly net income of $39 million improved from the $106 million loss in the year-ago quarter. Although non-Bitcoin expenses rose approximately as fast as revenue on average, the 79% increase in gross profit allowed for a positive net income.

This improved upon fiscal 2020 when non-Bitcoin revenue climbed 23%, and net income fell 43% to $213 million amid lower activity during the pandemic.

Despite the improvement, Square did not offer guidance for the upcoming quarter or the year, citing the uncertainty pertaining to the impact of COVID-19. This leaves its near-term growth uncertain.

Square's competitive advantage

Nonetheless, the potential of its ecosystem point to gains that could take it to $1 trillion or beyond by 2030. While companies like Stripe and PayPal are coming for Square's lunch, Square offers a level of consolidation not previously seen in the finance industry.

Banks have offered brokerage services for years. However, Square has built on that by adding business functionality. In the past, businesses had to buy from NCR for cash management systems and ADP to manage payrolls. Today, Square offers those services in-house. Moreover, now that Square has launched its own bank, businesses can handle all of their financial needs within Square's ecosystem.

Square has also helped to change personal finance through its Cash App. Thanks to its ability to handle transactions, buy and sell stocks, and trade cryptocurrency, Cash App can manage most personal banking functions. Additionally, Square's move into business banking could lead to consumer banking later, which would make it a one-stop-shop for finance.

Furthermore, Square only operates in six developed countries when counting its recent move into Ireland. Since Ireland is Square's first market that uses the euro, it could point to a move into other European Union (EU) countries. This leaves it with tremendously more expansion potential than PayPal, which currently operates in over 200 countries.

Will Square make it to $1 trillion by 2030?

Anything can happen over the next nine years. However, Square has significantly exceeded the needed 26% growth rate in non-pandemic years, indicating that it could reach a $1 trillion market cap by 2030. Moreover, the ecosystem it has formed for nearly all things finance should continue to attract new users. This is especially true internationally, as the company has not expanded into most of the EU or beyond. Hence, while its frothy earnings multiple could slow growth, the long-term growth rate points to a possible $1 trillion market cap by 2030, or possibly before.

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.