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3 Reasons To Like Iron Mountain

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3 Reasons To Like Iron Mountain

Document storage company Iron Mountain Inc (NYSE: IRM) offers investors "compelling value" for three key reasons, according to Wells Fargo.

The Analyst

Wells Fargo's Eric Luebchow initiated coverage of Iron Mountain with an Outperform rating and $38 price target.

The Thesis

Iron Mountain's core market of data storage is "much more stable" than it appears given the company's consistent retention rate of around 98% and destruction rates at around 5%, Luebchow wrote in a note. The company is also able to counter flat to slightly negative total volume growth through increasing its price by around 3% a year.

The bullish case for Iron Mountain is also based on the company's ability to "substantially" increase its data center business, which accounts for around 6% of total revenue. In fact, the company can focus its efforts on growing the data center business with existing companies, including 95% of the Fortune 1000 group.

Luebchow said Iron Mountain's dividend payout ratio of around 78% is inline with the broader REIT sector despite being an 8% dividend yield. The company has a pathway to bring its payout ratio to 70%-75% as AFFO growth accelerates.

Price Action

Shares of Iron Mountain were trading higher by 1% at $31.90 Wednesday afternoon.

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