Iron Mountain Nearing Plateau

We are encouraged by Iron Mountain Incorporated’s (IRM - Analyst Report) continued momentum throughout 2007 and early 2008, as the company reported its 77th consecutive quarter of increased storage revenues. The company has a strong balance sheet with $107.4 million in cash and cash equivalents ended March 31, 2008.

While we remain encouraged by strength in Iron Mountain’s storage services business, much of the company’s growth has been through acquisitions, which involves integration risk. This becomes more difficult with the company’s growing revenue base as it will be required to make larger acquisitions.

Shares of Iron Mountain are currently trading at 33.4x our 2008 earnings estimate of $0.77, representing a large premium to the industry mean and the S&P. On a P/S ratio, the stock is trading at 1.7x our 2008 sales estimate of $15.26 per share, also representing a premium to its industry mean and median.

As long as the company continues to perform at a high level, we believe the shares can maintain their current valuation, and perhaps increase slightly, but would not chase the stock at current levels. We therefore maintain a Hold rating on IRM shares, and set our six-month price target to $27.00, based on a P/S multiple of 1.8x our 2008 sales estimate, the high-end of its peer group range.

Read the full analyst report on IRM