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Here's Why You Should Retain Iron Mountain (IRM) Stock Now

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Iron Mountain (IRM - Free Report) is well poised for growth with solid cash flows in the storage business and focus on the data-center business. However, higher reliance on non-paper-based technologies and slowdown in service activity act as deterrents for the service segment.

The company enjoys a steady stream of recurring revenues from its core storage and records management businesses. The REIT is supplementing its storage segment’s performance with expansion in its faster-growing businesses, particularly the data-center segment. Such focus on data-enter portfolio expansion will diversify the company’s revenue mix and improve its adjusted EBITDA margins. Iron Mountain leased 19 megawatts of capacity at its global data-center portfolio through the first seven months of 2021. Management’s leasing outlook for 2021 is more than 30 megawatts.

Robust growth in cloud computing, the Internet of Things and big data, and a greater call for third-party IT infrastructure are spurring the demand for data-center infrastructure. Further, growth in artificial intelligence, autonomous vehicle and virtual/augmented reality markets is anticipated to be solid over the next five to six years.

As infrastructure providers for the rapidly-growing digital economy, data-center landlords, such as Iron Mountain, Digital Realty Trust (DLR - Free Report) , CyrusOne Inc. (CONE - Free Report) and CoreSite Realty Corporation (COR - Free Report) , are well placed for sustainable growth.

Iron Mountain is also making organic growth efforts on the back of expansion projects and developments. It has not only gained new customers from acquisitions but also has been able to expand operations in international markets, specifically, the emerging ones.

The REIT also has a decent balance-sheet position. It has ample financial flexibility to meet its near-term debt obligations and other capital commitments, while pursuing growth opportunities. Specifically, it had total liquidity of $2.1 billion as of Jun 30, 2021, including cash and cash equivalents of $315.9 million.

However, archiving of original hard-copy documents is losing its relevance, while paper needs are shrinking at the enterprise level. These, along with shifts in data storage through non-paper-based technologies, are affecting the physical storage volume and eroding demand for the handling of records. This is reducing service activity levels and record management volume.

In addition, the digitization of records might shift its revenue mix from the more-predictable storage revenues to service revenues that are more volatile.