It has been a great few years for investors in the UK’s leading supermarket Tesco (LSE: TSCO). Tesco shares performed very well. Indeed, the share price has more than doubled in the last five years.

However, in recent days the price has wavered. This week’s trading update didn’t exactly get the city excited.

Solid business, growing

In my opinion, the case of investing in Tesco is quite straightforward.

Groceries are a huge market, and since people always need to eat, that’s unlikely to change.

As the largest supermarket in the country, Tesco enjoys economies of scale. It benefits from a sturdy brand, a vast retail facility, an established digital business and a club card loyalty program with over 20 million members.

This is all well and good, but perhaps Tesco’s strength is also its weakness.

Why? It operates a solid business in an industry with low profit margins and modest growth prospects. As the market leader, it will have difficulty growing by gaining market share as smaller, more agile rivals can. Tesco’s medium-term growth prospects seem mediocre at best.

So when I think about Tesco shares, I usually believe that they deserve a valuation appropriate for a mature, low-margin business that is attractive but has constrained growth opportunities.

I believe that share price momentum is weakening

When you compare this with the share price growth in recent years, it will be challenging to reconcile these two values.

One explanation is that investors previously considered Tesco undervalued, appreciated its defensive qualities and rewarded a strategic refocus on its core business in recent years, with the company’s previous global ambitions now not extending beyond Europe.

However, the rise in share prices means Tesco shares are now trading at 17 times earnings. This looks pricey to me.

To sustainably justify a higher share price, I believe Tesco needs a more compelling growth story.

This week’s trade announcement was quite monotonous, however. Comparable sales (excluding VAT and fuel) in the entire group in the first quarter were 1% higher than in the same period last year.

Booker The wholesale business performed worse, losing sales, but although the food business grew faster than the company’s 1% target, its growth still remained below 2%.

I don’t see any compelling reason to buy now

I don’t think that’s a bad number. This is basically what I would expect from a mature market leader in a mature category for which demand is generally stable.

But therein lies the investor’s problem. Priced at an attractive level – as it was five years ago – such a stable company may be very attractive to me.

However, the more pricey it is, the less convincing it seems to me.

I see no particular reason to expect sturdy share price growth in the coming years. Tesco’s profitability is 3.3% – just above FTSE100 average – is comparable to or even worse than many other companies that I believe offer greater growth potential.

So I won’t be buying Tesco shares for my portfolio.

Is it worth investing £5,000 in Tesco Plc now?

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Christopher Ruane does not hold any position in the companies mentioned.