Sietel Limited (ASX:SSL), a AUDA$42.44M small-cap, is a real estate company operating in an industry which is the most prevalent industry globally, and has continued to play a crucial role in the portfolios of investors. Real estate analysts are forecasting for the entire industry, a somewhat weaker growth of 1.67% in the upcoming year , and an optimistic near-term growth of 11.76% over the next couple of years. However, this rate came in below the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether SSL is a laggard or leader relative to its real estate sector peers. View our latest analysis for Sietel

What’s the catalyst for SSL’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. In the past year, the industry delivered growth of 5.85%, beating the Australian market growth of -4.59%. Given the lack of analyst consensus in SSL’s outlook, we could potentially assume the stock’s growth rate broadly follows its real estate industry peers. This means it is an attractive growth stock relative to the wider Australian stock market.

Is SSL and the sector relatively cheap?

The real estate sector’s PE is currently hovering around 11x, in-line with the Australian stock market PE of 16x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 9.80% compared to the market’s 11.92%, potentially indicative of past headwinds. On the stock-level, SSL is trading at a higher PE ratio of 19x, making it more expensive than the average real estate stock. In terms of returns, SSL generated 3.57% in the past year, which is 6% below the real estate sector.

What this means for you:

Are you a shareholder? Real estate stocks are currently expected to grow slower than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards lower-growth. If growth was one of your main investment catalyst in the sector, now would be the time to revisit your holdings in SSL. Keep in mind the sector is trading relatively in-line with the rest of the market, which may mean you’ll be selling out at a reasonable price.

Are you a potential investor? The real estate sector’s below-market growth and average valuation hardly makes it an exciting investment case. If you’re looking for a high-growth stock with potential mispricing, it seems like real estate companies like SSL isn’t the right place to look. However, if you’re interested in the stock for other reasons, I suggest you research more into the company’s cash flow as well as its financial health in order to gain a holistic view of the stock.

For a deeper dive into Sietel’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.