Business Support Stocks

Iron Mountain Inc Valuation – April 2018 $IRM

Company Profile (excerpt from Reuters): Iron Mountain Incorporated, incorporated on June 26, 2014, is a holding company, which stores records, primarily physical records and data backup media, and provides information management services in various locations throughout North America, Europe, Latin America, Asia Pacific and Africa. The Company operates through five segments: North American Records and Information Management Business, North American Data Management Business, Western European Business, Other International Business, and Corporate and Other Business. The Company offers records and information management services, and data management services. The Company provides storage and information management services to legal, financial, healthcare, insurance, life sciences, energy, businesses services, entertainment and government organizations. As of December 31, 2016, the Company’s courier fleet consisted of approximately 4,500 owned or leased vehicles. Its other services include information destruction services (primarily secure shredding) (Destruction), information governance and digital solutions, compliant records management and consulting services, and other ancillary services.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of IRM – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,235,534,800 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.47 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -22.78% Fail
6. Moderate PEmg Ratio PEmg < 20 40.55 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.88 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.47 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 11.12 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.81
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $11.74
MG Value based on 0% Growth $6.88
Market Implied Growth Rate 16.03%
Current Price $32.82
% of Intrinsic Value N/A

Iron Mountain Incorporated (Delaware) REIT does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.13 in 2014 to an estimated $0.81 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.03% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Iron Mountain Incorporated (Delaware) REIT revealed the company was trading above its Graham Number of $13.95. The company pays a dividend of $2.24 per share, for a yield of 6.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 40.55, which was above the industry average of 32.93. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.77.

Iron Mountain Incorporated (Delaware) REIT scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.77
Graham Number $13.95
PEmg 40.55
Current Ratio 1.47
PB Ratio 3.88
Current Dividend $2.24
Dividend Yield 6.82%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,950,315,000
Total Current Liabilities $1,330,173,000
Long-Term Debt $6,896,971,000
Total Assets $10,972,402,000
Intangible Assets $5,470,814,000
Total Liabilities $8,674,964,000
Shares Outstanding (Diluted Average) 271,501,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.06
Dec2017 $0.69
Dec2016 $0.42
Dec2015 $0.58
Dec2014 $1.66
Dec2013 $0.50
Dec2012 $0.98
Dec2011 $2.02
Dec2010 -$0.29
Dec2009 $1.08
Dec2008 $0.40
Dec2007 $0.76
Dec2006 $0.64
Dec2005 $0.56
Dec2004 $0.48
Dec2003 $0.43
Dec2002 $0.30
Dec2001 -$0.24
Dec2000 -$0.15
Dec1999 -$0.13
Dec1998 -$0.03

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.81
Dec2017 $0.71
Dec2016 $0.76
Dec2015 $1.00
Dec2014 $1.13
Dec2013 $0.87
Dec2012 $0.98
Dec2011 $0.92
Dec2010 $0.42
Dec2009 $0.74
Dec2008 $0.57
Dec2007 $0.63
Dec2006 $0.54
Dec2005 $0.43
Dec2004 $0.29
Dec2003 $0.15
Dec2002 -$0.01

Recommended Reading:

Other ModernGraham posts about the company

Iron Mountain Inc Valuation – July 2016 $IRM
Iron Mountain Inc. Annual Valuation – 2015 $IRM
18 Companies in the Spotlight This Week – 5/17/14
Iron Mountain Inc. (IRM) Annual Valuation – 2014

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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