One of the biggest narratives in the stock market over the past two years has been the rebound in Wal-Mart Stores Inc (NYSE:WMT). That rebound in WMT stock took its most recent leg higher after the big-box retailer reported yet another clean beat-and-raise quarter.

WMT stock now trades near $100. It was below $60 just two years ago. That is a huge 65%-plus run in 2 years which makes the stock a big out-performer (S&P 500 is up just over 25% in that time frame).

It also stands in stark contrast to the 25% decline Target Corporation (NYSE:TGT) stock has suffered over the past two years.

What is going on the under hood? WMT is successfully turning into the brick-and-mortar version of Amazon: a low-price, one-stop-shop where you can find everything from groceries to sporting goods and where consumer convenience is the priority. Plus, WMT is also successfully fighting back in the digital game against AMZN.

Can this run continue?

I don’t think so. WMT stock feels overvalued at these levels. While I understand the excitement around the fact that Walmart is finally growing again, I don’t understand paying nearly 23x this year’s earnings for 5-6% earnings growth potential over the next several years.

Impressive Turnaround For WMT

The WMT turnaround has been quite impressive.

Back in 2015, the Amazon digital retail sales growth narrative was accelerating with such pace that it threatened all of brick-and-mortar retail. Walmart was seeing its traffic consistently decline in the 1% range each quarter as shoppers continually migrated to Amazon.

WMT stock dropped like a rock. It dropped from $90 at the end of 2014 to below $60 in late 2015.

But then WMT started upping its digital game. Plus, the company started cutting prices to drive traffic. Average ticket growth dropped, but shoppers stated trickling back into stores.

Now, WMT’s digital game is on fire. E-commerce sales are roaring 50%-plus higher every quarter. Traffic is up more than 1%. So is the average ticket. Comparable sales growth is near 3%.

WMT has shot up like a rocket ship. It’s now above its peak in late 2014.

Valuation Is a Concern for WMT Stock

Despite the impressive turnaround, it pays to remember that WMT is very, very big. Therefore, growth will be very, very small.

The top-line is growing in the 1-4% range. That growth rate won’t get any better in the foreseeable future. At best, this is a 3% per year revenue growth story.

Gross margins are actually struggling thanks to a greater mix of e-commerce sales. This trend won’t reverse in the near future because e-commerce will continue to comprise a bigger and bigger mix of sales. Consequently, gross margin outlook is bleak.

A 3% top-line growth rate plus flattish margins mean any outsized earnings growth will be driven by share buybacks. At best, that turns 3% top-line growth into 5-6% annualized earnings growth.

But WMT stock is trading at 22.5x this year’s earnings estimate. A 22.5x multiple seems very expensive for 5.5% growth. That combination is a price-to-earnings/growth (PEG) ratio of over 4.

But the S&P 500 is trading at PEG of under 2 (19.6x for 10.4% growth).

That just doesn’t make any sense.

Bottom Line on WMT Stock

It was a really good quarter. Kudos.

But the valuation of WMT stock now makes no sense. The stock is trading at an insane premium to both its trailing 5-year average valuation as well as its growth prospects.

I’m avoiding the name here. It’s a good growth story, but the valuation is just too big.

As of this writing, Luke Lango was long AMZN and TGT.