{"id":20958,"date":"2023-06-10T15:40:30","date_gmt":"2023-06-10T19:40:30","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/iron-mountain-stock-learning-from-our-mounting-mistakes-nyseirm\/"},"modified":"2023-06-10T15:40:32","modified_gmt":"2023-06-10T19:40:32","slug":"iron-mountain-stock-learning-from-our-mounting-mistakes-nyseirm","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=20958","title":{"rendered":"Iron Mountain Stock: Learning From Our Mounting Mistakes (NYSE:IRM)"},"content":{"rendered":"
\n

<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

The IRM Investment Thesis Has Been Robust, Afterall<\/strong><\/h2>\n

Author’s Historical Rating on IRM<\/strong><\/p>\n

\"Author's<\/span>
\n

Seeking Alpha<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

We have been very wrong about Iron Mountain Incorporated (NYSE:IRM<\/span>) indeed, as evidenced by our mistaken hold rating in October 2022, when the stock is very cheap (in hindsight, of course).<\/span><\/p>\n

IRM Total Returns Since October 2022, Including Dividends<\/strong><\/p>\n

\n

\"IRM<\/span>
\n

Trading View<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Through this blunder, we have missed out on IRM’s impressive stock return of +26.37% over the past few months, against SPY at +15.12%. Otherwise, a total return of +29.31% including dividends, against the SPY at +19.09%.<\/p>\n

It appears that the company continues to outperform expectations as well, with the accelerating Storage Rental Revenue of $810M (+5.1% QoQ\/ +7.8% YoY), easily negating the deceleration in the Service Revenue to $504M (-1.1% QoQ\/ +1.4% YoY) in the latest quarter.<\/p>\n

Notably, these numbers are much improved compared to IRM’s <\/span>FQ1’22 Storage Rental Revenue cadence of +6% YoY, though moderated against the Service Revenue of +32.8% YoY.<\/span><\/p>\n

Either way, the result remains net positive for the company for now, with total revenues of $1.31B (+2.7% QoQ\/ +5.2% YoY) and AFFO of $284M (inline QoQ\/ +7.4% YoY). The latter has allowed it to sustain a dividend payout of $0.6185 per share quarterly, triggering an annualized dividend yield of 4.38% based on the current share prices, and a payout ratio of 63.7% based on the latest quarter’s AFFO per share of $0.97.<\/p>\n

IRM 2Y Stock Price<\/strong><\/p>\n

\n

\"IRM<\/span>
\n

Trading View<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

These numbers are impressive indeed, with the decline in IRM’s yield from the 4Y average of 6.58% only attributed to the rising stock prices by +93.08% since early 2021, compared to the SPY at +14.09% at the same time. The excellent combination of decent yields and high growth must have been greatly welcomed by its long-term shareholders.<\/p>\n

The durability of the company’s demand is also demonstrated by the raised FY2023 guidance, with revenues of $5.55B (+8.8% YoY) and AFFO per share of $3.95 (+3.9% YoY) at the midpoint, despite the peak recessionary fears.<\/p>\n

These numbers imply the safety of its dividends, with IRM still boasting robust customer retention at 98% and over 50% in physical records retention for the past few years.<\/p>\n

Naturally, there are risks to the company’s execution, due to the rising interest rate environment. For example, it recorded a higher annualized interest expense of $548.8M (+12.4% YoY) and a growing weighted average interest rate of 5.3% (+0.2 points QoQ\/ +0.9 YoY) by the latest quarter, on top of the expanding long-term debts of $10.93B (+3.5% QoQ\/ +7.7% YoY).<\/p>\n

Then again, depending on the Fed’s action at the upcoming meeting, with only 34.4% of market analysts projecting a 25 basis point hike, we may see IRM’s interest expenses peak at current levels and moderate from henceforth.<\/p>\n

Assuming a similar 63.7% in payout ratio, it is not overly speculative to project a raised dividend payout to $2.51 annually or $0.629 quarterly by the end of 2023, suggesting an excellent +1.6% increase, similar to its historical cadence.<\/p>\n

Those numbers also imply an improved forward yield of 4.45%, both a win for IRM’s long-term shareholders, while allowing the company to achieve its long-term “target AFFO payout ratio of low to mid-60.”<\/p>\n

So, Is IRM Stock A Buy<\/strong>, Sell, Or Hold?<\/strong> <\/h2>\n

IRM 5Y EV\/Revenue and Price\/ FFO Per Share<\/strong><\/p>\n

\n

\"IRM<\/span>
\n

S&P Capital IQ<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Therefore, it is unsurprising to see the same optimism baked in IRM’s valuations, at NTM EV\/ Revenues of 5.28x and NTM Price\/ AFFO Per Share of 18.09x, against its 5Y mean of 4.71x and 15.40x, or 1Y mean of 5.16x and 13.64x.<\/p>\n

Based on the management’s optimistic FY2023 guidance of AFFO per share of $3.95 and NTM Price\/ AFFO Per Share of 18.09x, we are still seeing a relatively attractive upside potential of +26.7% to our price target of $71.45.<\/p>\n

As a result, we are cautiously rerating IRM as a Buy here, with the caveat that investors size the portfolio appropriately. With the stock already recording an impressive rally of +12.11% YTD, compared to the SPY at +12.01%, it remains to be seen if it may break out of the previous 2022 resistance levels.<\/p>\n

Otherwise, bottom-fishing investors may consider waiting a little longer for a further retracement to the Q1’23 support levels of $50 for an improved margin of safety.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The IRM Investment Thesis Has Been Robust, Afterall Author’s Historical Rating on IRM Seeking Alpha We have been very wrong about Iron Mountain Incorporated (NYSE:IRM) indeed, as evidenced by our mistaken hold rating in October 2022, when the stock is very cheap (in hindsight, of course). IRM Total Returns Since October 2022, Including Dividends Trading […]<\/p>\n","protected":false},"author":1,"featured_media":20959,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-20958","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nIron Mountain Stock: Learning From Our Mounting Mistakes (NYSE:IRM) | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The IRM Investment Thesis Has Been Robust, Afterall Author's Historical Rating on IRM Seeking Alpha We have been very wrong about Iron Mountain\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=20958\" \/>\n<meta property=\"og:locale\" content=\"en_US\" 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