10-year

10-Year Anniversary Promotion (20% off)

Join GuruFocus Premium Membership Now for Only $279/Year

Once a decade discount

Save up to $500 on Global Membership.

Don't Miss It !

Free 7-day Trial
All Articles and Columns »

What´s Behind Iron Mountain's Earnings Growth

Victor Selva

Victor Selva

9 followers

Iron Mountain (IRM) stores records, primarily paper documents and data backup media, and provides information management services. The company’s information management services are divided into three main service categories: records management services, data protection and recovery services; and information destruction services. The company provides its services to commercial, legal, banking, health care, accounting, insurance, entertainment and government organizations.

In this article, let's take a look at this company and try to explain to investors the reasons this is an apparently appealing investment.

Diversified Revenue Base

The company serves more than 156,000 clients across different industries and geographical locations. The customer base is diversified by industry, with commercial, legal, banking, health care, accounting, financial, entertainment and government organizations. It is important to note that almost 95% of Fortune 1000 companies are its clients. Also, no single customer has accounted for more than 2% of its revenues over the last three years.

Aggressive Acquisition Strategy

Past year growth was largely the result of acquisitions that helped to create a large base of U.S. information protection and storage service operations. In 2007, two significant acquisitions were ArchivesOne Inc. and RMS Services; and the large acquisition of Stratify Inc. Iron Mountain has not only gained new customers from these acquisitions but has also been able to expand its operations in international regions such as Greece, China, Hong Kong, Singapore, Switzerland and Turkey. In order to expand its presence in the emerging markets, the company recently entered into fast-growing economies like Colombia and Brazil through acquisitions.

It has entered the Colombian market through a US$54mn acquisition; it has acquired Secure Data Solutions Colombia and G4S Document Delivery, G4S' Colombian records management and data protection business. Also, it has purchased Archivum, a family-owned records storage firm based in Brazil.

Analyst Recommendation

The firm is currently Zacks Rank # 3–Hold, and it also has a longer-term recommendation of “Neutral”. A Hold rating indicates that the stock, over the next 1 to 3 months, will perform at an annualized rate of 10.56%, very similar to the S&P 500. For investors looking for a better Zacks Rank, Odyssey Marine Exploration Inc. (OMEX), Rentrak Corporation (RENT) and SouFun Holdings Ltd. (SFUN) could be better options.

Relative Valuation

In terms of valuation, the stock sells at a trailing P/E of 53.4x, trading at a premium compared to the industry mean. Earnings per share (EPS) has increased by 66.67% in the most recent quarter compared to the same quarter a year ago, $0.25 per share for the fourth quarter. In the next graph we include the stock price because EPS often lead the stock price movement. As we can appreciate in the chart, the price performance was highly volatile in the last year.

1397063483622.png

Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. The ratio has decreased from the same quarter one year prior. This is a clear sign of weakness within the company.

Let´s compare the current ratio with the peer group in the next table:

Ticker

Company Name

ROE (%)

IRM

Iron Mountain

9.29

OMEX

Odyssey Marine Exploration

-61.99

RENT

Rentrak Corporation

-47.14

SFUN

SouFun Holdings

81.23

CRD.B

Crawford & Company

25.51

EXAM

ExamWorks Group, Inc.

-3.74

VVI

Viad Corporation

6.2

The company has a current ratio of 9.29% which is higher than the one registered by Odyssey Marine Exploration, Rentrak Corporation, ExamWorks Group Inc. (EXAM) and Viad Corporation (VVI). But for investors looking for a higher ROE, Crawford & Company (CRD.B) and SouFun Holdings could be better options.

Final Comment

Key growth drivers include increasing revenues from existing customers, new clients, new products and services and acquisitions. In this matter, we think that strategic acquisitions in emerging markets like Brazil, Russia, China and India, which will boost its international revenues, going forward.

I would recommend investors to consider adding the stock for their long-term portfolios. Hedge fund gurus have also been active in the company in the fourth quarter of 2013. Gurus like John Keeley (Trades, Portfolio) and RS Investment Management (Trades, Portfolio) have taken long positions on it.

Disclosure: Victor Selva holds no position in any stocks mentioned.


Rating: 4.3/5 (3 votes)

Voters:

Comments

seadog20
Seadog20 - 8 months ago

Greg Stemm, the co-founder and current CEO of Odyssey. Marine Exploration, and John C. Morris, the co-founder of Odyssey Marine Exploration, were both sued by the Securities and Exchange Commission.

It appears that Neptune Minerals is insolvent.

Oceanica is extremely unlikely to get an environmental permit.

Oceanica’s cofounding shareholder, DNA Ltd, Inc, is tied to a Panamanian entity whose principal members are connected to a number of alleged financial crimes – why did Odyssey Marine Exploration structure it this way?

Isn’t it weird that Odyssey Marine Exploration has been unable to address any of the serious questions posed by concerned shareholders?

It’s concerning that John Morris, the founder of Odyssey Marine, is currently being sued by members of Seagrass Recovery.

Odyssey Marine Exploration and Neptune Minerals have been tied to brokerage firms with many FINRA sanctions, this is very alarming – would you invest in this company? Buyer beware.

Odyssey Marine Exploration has disappointed 100% of the time on its estimated project recoveries, can you trust anything they say?

Why does Odyssey Marine Exploration have opaque and unexplained offshore subsidiaries in the Bahamas and Panama? These are completely unnecessary for Odyssey’s operations.

Based on its current cash reserves and negative cash flow Odyssey Marine Exploration could very well go bankrupt in 2014.

Odyssey Marine Exploration was held in contempt of court after it lost the Blackswan case.

World-class phosphate mining companies have previously evaluated and passed on the Oceanica asset – Odyssey is the only company interested in this uneconomic asset.

Didn’t Odyssey’s chairman Brad Baker get exposed for signing on both sides of a deal?

Why does Odyssey Marine Exploration use an auditor that has been sanctioned multiple times by the Public Company Accounting Oversight Board?

Based on accurate historical records, there was never any secret army gold aboard the SS Central America.

It’s alarming that Odyssey Marine Exploration started as a shell purchased by Timothy Brasel, who was later cited by an SEC civil action for stock manipulation.

It’s shocking that the predecessor of Odyssey Marine Exploration, Seahawk, went bankrupt – but it’s even more shocking that every other reverse merger treasure hunting company (six in total!) have also gone bankrupt.

It’s alarming that Odyssey Marine Exploration has lost nearly $200,000,000 of shareholder capital while insiders have personally made millions – how much longer can this continue?

Isn’t it ironic that Odyssey Marine Exploration has posted enormous financial losses but CEO Greg Stemm makes enough money to afford five houses for himself and his family? That doesn’t seem fair at all.

Why does Odyssey host closed conference calls in which only their investment bankers get to ask questions? Why won’t Odyssey answer questions from other shareholders? Are they hiding something?

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK