3 Reasons To Like Iron Mountain

Document storage company Iron Mountain Inc 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.