Big-box retailer Walmart (WMT -1.40%) has been one of the most resilient retail stocks to hold over the past five years. It fared well amid the pandemic and rising inflation, as its versatile business has been able to adapt to changing economic conditions. the market has appreciated its success and the stock has rallied more than 146% over the past five years.

Recently, however, there has been growing concern among some investors about a possible slowdown ahead for the company. Given the stock's significant run-up in price, its high valuation could dissuade investors from buying up this blue-chip investment.

Is Walmart's stock in trouble? Could a sell-off be on the horizon?

Walmart offers modest guidance ahead for the current fiscal year

On Feb. 20, Walmart released its year-end numbers and also issued guidance for the upcoming year. For fiscal 2025, which ended on Jan. 31, the company's top line rose by just over 5% to $681 billion. For fiscal 2026 (now underway), Walmart expects a more modest growth rate between 3% and 4% in net sales. There is also the danger that tariffs could weigh down its growth even further.

The company was able to generate reliable growth in recent quarters even as consumers cut back on spending. The vast majority of Walmart's sales are groceries (they account for close to 60% of Walmart's sales in the U.S.). By relying primarily on necessities rather than discretionary purchases, Walmart has been a better retail stock to own over the years than other companies. Rival Target, for instance, is heavily impacted by a slowdown in discretionary spending. As a result, Target saw its share price rise by just 11% in the past five years as slowing growth spooked investors.

Is Walmart stock too expensive?

Walmart's sharp stock rally in recent years has been at a much faster pace than its profit growth, and that has pushed up its price-to-earnings (P/E) multiple to elevated levels. At a P/E of 41, this is not a cheap stock to own by any means. While it arguably deserves a premium over Target (which investors are paying just 13 times earnings for), Walmart is trading at far higher levels than its five-year P/E average.

Data by YCharts.

Paying a high multiple for a business can be justifiable when it is experiencing strong growth. But with Walmart growing its sales at a slower pace this year, some investors may consider taking a step back from the stock.

Walmart's outlook isn't optimal, and that's a problem when the stock trades at 40 times earnings. Expectations are high. This could lead to a significant correction in the weeks ahead depending on what happens with tariffs as it directly relates to Walmart.

Walmart investors should brace for some adversity ahead

Between its high valuation, slowing growth, and the potential for tariffs to weigh on its bottom line, I do think Walmart's stock could be in a bit of trouble and experience a sharp decline in the near future.

The silver lining, however, is that if there is a fall in price, then that will only make it a better buy for long-term investors interested in the stock. While the economic conditions ahead may be worrisome for investors, they aren't going to last forever. If you're looking to hang on to the retail stock for at least five-plus years, Walmart can still make for an excellent buy even if there isn't a big correction. Investors, however, should brace for some possible volatility over the next few years.