After suffering from a downturn along with other high-growth stocks this past spring, shares of Square (SQ 0.37%) are back on the rise and notching yet another market-beating return so far in 2021 (the stock is up 29% year to date as of this writing, compared to an 18% return for the S&P 500).  

However, after the announced acquisition of smaller fintech peer Afterpay (AFTP.Y) and a subsequent run higher, Square is valued at an enterprise value of $124 billion. The stock is up an incredible 2,390% over the last five years alone.

Is it too late to buy? Hardly.

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Image source: Getty Images.

Square is an economic recovery play and a high-growth technologist

Along with the $29 billion bombshell announcement that it's taking over buy-now-pay-later (BNPL) firm Afterpay, Square also reported pretty stellar results for Q2 2021. Gross profit (which largely excludes effects from Bitcoin since Square generates little in the way of profit from the cryptocurrency) was up 91% year over year to over $1.14 billion.  

The two broad segments of its business -- the seller ecosystem and consumer-facing Cash App -- both had an epic rise in the last quarter. For the seller ecosystem that operates under the Square name and includes digital payments and banking services for merchants, gross profit grew 85% year over year to $585 million. This is largely due to the lapping of the initial effects of the pandemic last year when economic activity all but ground to a halt for a brief blip. But with spending back on a tear this year, the Square seller ecosystem is booming.  

Then there's Cash App, which grew by a triple-digit percentage pace last year due to consumers being cooped up at home and turning to digital tools to get their money management needs taken care of. But Cash App is continuing its epic advance even as effects of the pandemic ease. Gross profit for the segment was up 94% year over year to $546 million. The addition of Afterpay's white-hot BNPL service will add another big reason for consumers to use Cash App, not to mention the other myriad of merchant services Square can now cross-sell to Afterpay's largely international following.  

Later this year, Square's growth trajectory will start to slow as it laps progressively busier quarters from 2020 in which economic activity was not disrupted as much by COVID-19 as it was last spring. Nevertheless, this is still very much a growth business with a massive opportunity to continue expanding overseas.

The future of financial services is just getting started

But what about valuation? Square generated a net income of $204 million in Q2, but as a growth-oriented company funneling most of its excess cash back into the business to promote expansion, profitability isn't a consistent metric yet. And when backing out Bitcoin revenue, Square now trades for an "expensive" 20 times trailing-12-month sales.

However, Square competes against many massive peers in digital payments and traditional banking that are multiple times larger than it is. For example, in digital payments, Visa has an enterprise value of nearly $520 billion. Bank of America is valued at nearly $400 billion, and QuickBooks and TurboTax parent Intuit is valued at over $140 billion. An enterprise value of $124 billion sounds like a big number, but it's still a pretty small business in a global financial services industry worth trillions of dollars every year.  

Square is aiming to stitch together elements from multiple legacy peers, combining digital payments with banking, investment, and financial management software. It's still growing at a rapid pace and not letting its foot off the gas, and it has massive potential ahead of it in the next decade as younger generations look for a one-stop-shop in a mobile-friendly format. It's far from too late to buy Square if you plan to stick with this fintech stock for the long haul.