Iron Mountain Inc. (IRM) Annual Valuation – 2014

200px-IM_logo.svgBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing 5 Undervalued Companies for the Defensive Investor.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Iron Mountain Inc. (IRM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Iron Mountain Incorporated (Iron Mountain) is engaged in storing records, primarily paper documents and data backup media, and provide information management services. The Company offers records management services, data protection and recovery services and information destruction services. Its information management services are divided into three categories: records management services, data protection and recovery services, and information destruction services. In May 2012, the Company acquired records storage firms File House Offsite Record Storage in Fredericksburg, Va., and Document Systems Inc. in Columbia, S.C. and offsite data protection provider First National Safe Deposit in the Philadelphia area. In May 2013, Iron Mountain Inc acquired Information Storage Consolidation Co LLC. In June 2013, Iron Mountain Inc announced that it has acquired Brazilian document storage firm Archivum. In October 2013, the Company announced that it has acquired Cornerstone Records Management.

IRM Chart

IRM data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 1/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 2/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $26.98
MG Value $32.67
MG Opinion Fairly Valued
Value Based on 3% Growth $12.31
Value Based on 0% Growth $7.21
Market Implied Growth Rate 11.65%
Net Current Asset Value (NCAV) -$24.37
PEmg 31.79
Current Ratio 1.14
PB Ratio 4.97

Balance Sheet – 3/31/2014

Current Assets $987,600,000
Current Liabilities $867,900,000
Total Debt $4,288,600,000
Total Assets $6,706,600,000
Intangible Assets $3,085,600,000
Total Liabilities $5,663,800,000
Outstanding Shares 191,920,000

Earnings Per Share

2014 (estimate) $1.05
2013 $0.52
2012 $1.05
2011 $1.26
2010 -$0.27
2009 $1.08
2008 $0.40
2007 $0.76
2006 $0.64
2005 $0.57
2004 $0.48

Earnings Per Share – ModernGraham

2014 (estimate) $0.85
2013 $0.74
2012 $0.80
2011 $0.67
2010 $0.42
2009 $0.74

Dividend History

IRM Dividend Chart

IRM Dividend data by YCharts


Iron Mountain Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  In fact, the only requirement of the Defensive Investor which the company passes is the market cap size.  Likewise, the Enterprising Investor has significant concerns with the lack of earnings stability over the last five years and the high level of debt relative to current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation perspective, the company appears fairly valued after growing its EPSmg (normalized earnings) from $0.42 in 2010 to an estimated $0.85 for 2014.  This demonstrated level of growth supports the market’s implied estimate of 11.65% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Iron Mountain Inc. (IRM)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Iron Mountain Inc. (IRM) or in any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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