TechnologyOne Ltd (ASX: TNE) shares have been on a bit of a tear lately, with the stock jumping 15% this past week.

This brings gains in the software company to more than 21% for the year, after a jumping by more than a third during the last month of trade.

Judging by those numbers, momentum is behind the stock, and sentiment is overwhelmingly positive. Investors are currently paying over $90 for every $1 of TechnologyOne's profits to own it today, equal to a price-to-earnings (P/E) ratio of 90x.

So, is now the time to snap up this ASX tech stock, or should investors hold off? Let's see what Macquarie thinks.

Macquarie's latest on TechnologyOne shares

Top broker Macquarie released a note on TechnologyOne shares after the company posted its half year results earlier this week.

Analysts highlighted strong "operating momentum" across several divisions for the software company. Factors like its Software-as-a-Service (SaaS) offering are a "tool do driver higher (Annual Recurring Revenue) ARR growth" it says, which will be "accretive" to the company's pre-tax margins.

That, and the company's pipeline, are two standouts for Macquarie.

Deal wins at TasTAFE, the Australian Energy Regulator and Islington Council validate the strength of the pipeline. This strength comprises both ANZ and the UK as well as the Local Government, Higher Education and Government verticals.

Incremental detail on this in recent research. This opportunity is defined both by higher customer numbers and increasing deal sizes. We highlight below that most new deals are larger than the current ARR per customer of A$401k.

Macquarie also flags the upcoming investor day and the company's annual results as potential catalysts for the business.

Despite the upbeat momentum, Macquarie retained its hold rating on TechnologyOne shares. The reasons why are seem fairly explanatory.

For one, the stock is trading at a hefty valuation, equal to a forward P/E of 78x estimated earnings at the time of the report. That's $78 for every $1 of profits.

According to data site World PE Ratio, the estimated P/E ratio for the Australian stock market is currently 19.4x.

This lofty asking price leaves "little margin for error", it says, so any slip in execution or market sentiment could see this valuation contract down sharply. This could see TechnologyOne shares track lower.

Investors mightn't be willing to may as much to buy a dollar of the company's earnings, in other words.

It also noted that some of TechnologyOne's products saw fairly "soft" ARR growth, such as the enterprise asset management and enterprise budgeting divisions.

"Although this is potentially affected by rounding error", Macquarie notes, "it is clear that growth in these products was muted relative to the strong performance in Local Government and Higher Education".

The verdict? Small margin of safety, little margin for error, and potential risks as a result of this. In other words, Macquarie thinks TechnologyOne shares are currently expensive.

Foolish takeaway

TechnologyOne shares are riding a wave of deal wins and growing operations, but does this sway analysts at Macquarie? Not so.

The broker reckons the software stock is currently expensive, trading at high valuation multiples, which leaves little wiggle room if the company doesn't meet expectations.

While this is a potential risk, there's no denying the current strengths of the underlying business, on full display in its half-year numbers.

The stock is up more than 113% in the past year and fetched $38 apiece before the open on Friday.