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Can Iron Mountain compete with REITs in information facilities?

16, 2021

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This story originally appeared on MarketBeat

As businesses increasingly rely on the cloud for document storage, businesses like Eisenberg (NYSE: IRM) benefit from moving away from paper.

A few years ago when I moved out of a house, I had a garbage truck remove some things I no longer needed, including a metal filing cabinet. Fortunately, he was able to sell it to a scrap metal recycler. However, he told me that a big part of his business was people throwing away unwanted filing cabinets. Second-hand shops don't even accept them because nobody wants to buy them anymore.

These old cabinets can still be found in office settings, but are less common and take up less space every year.

Enter Iron Mountain, a Boston-based company providing records management, privacy, and data destruction services. You may have seen their trucks taking on shredding jobs from business customers. They also pick up papers for safe storage in temperature controlled warehouses. This is a good solution for papers such as medical or legal records that need to be kept for regulatory or other reasons but take up a lot of space in offices.

However, as companies move away from paper, Iron Mountain must turn around. One obvious direction is data storage. The company has already made a name for itself as a specialist in document and data security, so the switch makes intuitive sense.

This is a real estate game as the company is starting to find space for data centers.

Right now, Wall Street views Iron Mountain primarily as a paper shredder and storage company.

Companies that are more likely to be viewed as data center specialists include Equinix (NASDAQ: EQIX), CoreSite Realty (NYSE: COR), and Digital Realty Trust (NYSE: DLR).

These three companies are all structured as real estate investment trusts, which means that they offer investors some benefits in the form of pass-through income and pass-through tax deductions.

Here's how all of these companies fare in terms of their annualized sales growth rates for three years:

Eisenberg: 2.55%

Equinix: 11.15%

CoreSite Realty: 7.99%

Trust in digital real estate: 2.55

As you can see, even if it's structured as a real estate game, a paper storage company can't really keep up with the sales growth of companies that specialize in data storage.

Can Iron Mountain turn around and make paper storage a smaller part of its business and enlarge the chunk of data?

It certainly has an advantage when it comes to brand awareness with all the trucks that drive around the cities.

Customer stickiness is also a benefit. In a recent interview with Wall Street Transcript, CEO William Meaney said that 950 of the world's largest companies are our customers and our customer churn is less than 2% per year.

Iron Mountain stocks are up 17.09% over the past three months, 53.62% year-to-date, and 68.57% over the past 12 months. That three-month return remains strong despite the stock's current pullback.

The stock has been on a flat basis since pulling back from its June 9 high of $ 47.34. So far it has been corrected 11% from high to low. The base could also be designed as a cup, as it also takes this shape. As long as the correction remains below 15%, it can also be characterized as a flat base. At this point, the buy point is the previous high of $ 47.34.

Technically, the share is preparing itself well for a new attempt. Would-be investors should be aware, however, that Iron Mountain will announce its second quarter on Aug. 5, with analysts expecting earnings of $ 0.64 per share on sales of $ 1.09 billion. These would represent gains in both the top and bottom areas.

However, the company still has missing views of Wall Street in the past. However, that hasn't hurt the share price lately.

Earnings have increased for each of the past four years, with the annualized growth rate of net income over three years being 26.30%.

Shares closed at $ 44.04 on Thursday, up $ 0.30, or 0.69%.

Analysts' current target price for Iron Mountain is $ 33, a downward trend of 25%. This is another reason for potential investors to wait for the next earnings report.

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