Wesfarmers Ltd (ASX: WES) shares have seen plenty of volatility in the last few weeks, as the chart below shows. Like most stocks, the business has been exposed to market gyrations that have occurred after the announced US tariffs.

While it has recovered much of the lost ground following the market sell-off in early April, it's still down 6% from its peak on 17 February 2025.

I think the business is one of the best around, certainly in the retail sector. But is this the right time to invest?

Positives about investing in Wesfarmers shares

As I regularly like to point out, the market presence and financial strength of Kmart and Bunnings allow the business to generate very pleasing returns on the money it invests.

If a business can generate a return of more than 60% on the capital it invests in a new store or initiative, you want that business to invest. It bodes well for future profit growth and, ultimately, shareholder returns.

In the FY25 half-year result, Bunnings Group generated a return on capital (ROC) of 71.5%, and Kmart Group made a ROC of 65.9%. In my view, these statistics help justify the current Wesfarmers share price.

As Warren Buffett (and Charlie Munger) taught the world, it's better to buy a wonderful business at a fair price than a fair business at a wonderful price.

Wesfarmers has an excellent track record of making good moves with its acquisitions and divestments (most of the time). I have been pleased with the company's expansion efforts into healthcare, which is a huge sector with ageing population tailwinds and ongoing investment in technology and overall digitalisation.

The business usually offers investors a solid dividend yield. According to Commsec, it could pay a grossed-up dividend yield of 3.8% in FY25, including franking credits.

Negatives about investing in Wesfarmers shares

It's a great business, and the valuation has increasingly reflected that, with the Wesfarmers share price now trading at a higher price-earnings (P/E) ratio than in recent history.

According to Commsec, Wesfarmers shares traded on an average P/E ratio of 20 in FY19, 23 in FY21, and 25 in FY24. The profit forecast on Commsec suggests it's trading at 32x FY25's estimated earnings. We'd all like to buy our investments at a cheaper price, so this business would be (even) more appealing if it were cheaper than it is today.

There are plenty of ASX shares that have fallen further than Wesfarmers in the last few weeks, which could make a better investment because of the potential to bounce back further. For example, a share price that falls 10% only needs to rise 11.1% to get back to where it was. A share price that dropped 30% would rise 42.8% if it returned to the same level.

In other words, there could be even better opportunities in the current environment.

Having said that, I do believe it would be an excellent long-term investment today.