Boyuan Holdings Limited (ASX:BHL), a AUD$92.65M small-cap, operates in the real estate industry which is the most prevalent industry in the global economy, and as an asset class, it has continued to play a crucial role in the portfolios of various investors. Real estate investments typically display unique and attractive investment characteristics relative to other stocks and bonds, especially over a long time horizon. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year, and a low 7 percent growth over the next couple of years. This rate is below the growth rate of the Australian stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the real estate sector right now. In this article, I’ll take you through the real estate sector growth expectations, and also determine whether BHL is a laggard or leader relative to its real estate sector peers. See our latest analysis for BHL

What’s the catalyst for BHL's sector growth?

Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. Over the past year, the industry saw growth in the teens, beating the Australian market growth of 6 percent. BHL lags the pack with its negative growth rate of -15164 percent over the past year, which indicates the company has been growing at a slower pace than its real estate peers. As the company trails the rest of the industry in terms of growth, BHL may also be a cheaper stock relative to its peers.

Is BHL and the sector relatively cheap?

The real estate sector's PE is currently hovering around 12 times, lower than the rest of the Australian stock market PE of 22 times. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry did returned a lower 13 percent compared to the market’s 16 percent, which may explain the lower relative valuation. Since BHL’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge BHL’s value is to assume the stock should be relatively in-line with its industry. In terms of returns, BHL generated 54 percent in the past year, which is 41 percent over the real estate sector.

What this means for you:

Are you a shareholder? BHL has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of BHL, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how BHL fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If BHL has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its real estate peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at BHL’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into Boyuan Holdings's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.