Please ensure Javascript is enabled for purposes of website accessibility

Is Iron Mountain a Great Data Center Stock?

By Matthew Frankel, CFP® – Updated Jun 22, 2021 at 3:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This company is building its presence in the data center space, but there are a few things investors should know.

Many data center stocks are expensive, but Iron Mountain (IRM -0.58%) is definitely not. However, is Iron Mountain a bargain, or is its legacy business going to be too much trouble for investors? In this Fool Live video clip, recorded on June 7, Fool.com contributor Matt Frankel, CFP, discusses Iron Mountain's data center ambitions and what investors should know about the rest of the company's business. 

10 stocks we like better than Iron Mountain
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Iron Mountain wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 7, 2021

 

Matt Frankel: If you're not familiar with Iron Mountain, most people know them for their paper shredding trucks that you'll see driving around cities, the mobile paper shredding service. They are the undisputed leader in document security. Their core business is they own a bunch of big storage facilities that look like Public Storage buildings. All they do is really store companies' sensitive records. If you have sensitive healthcare records that your providers have to keep in paper form, they might be housed in an Iron Mountain facility. If you have legal documents from a court case you had 10 years ago, they're probably stored in an Iron Mountain facility. They have a gigantic market share of the document storage business.

The problem is the need to store paper records is declining, so their core business is slowly but surely declining over time. Now the average box of documents that's in an Iron Mountain facility has been there for over 15 years, so it's not going to decline very fast, it's a very slow decline that we're seeing, as records gradually shift to digital.

In response to that, Iron Mountain is quietly getting into the data center space. Their thought is, "Our brand name is synonymous with document security in terms of paper documents, why not translate that brand name into the brand you can trust with digital records?" They're slowly but surely acquiring data center properties. I'm not sure if they're developing any on their own yet, but they are definitely acquiring a bunch. It's still a pretty small part of their business, and the challenge with Iron Mountain, because they're valued much, much lower than every other data center operator, because of this legacy business they have.

The question mark is, are they going to be able to grow their data center business faster than the core business of paper record storage declines? If it's yes, and they can successfully pivot to digital with that brand name, I can't think of any other data center operator that has a brand name like Iron Mountain. If they can successfully leverage that brand name, which I want to say something crazy like 95% of the Fortune 1000 use Iron Mountain facilities for their storage needs. They already have a built-in customer base. If they can replicate that success in the data center market, they could become a big player.

I'm an Iron Mountain shareholder. But if they pay something like a 7% dividend, they're valued really low, and it's because of that core business that's going to decline over time. It just is. Those are my thoughts on Iron Mountain. I like their move into data centers. I think that was really the only logical move. If you're in a company that relies on paper anything, you need to pivot to digital. I like their move, I think they need to ramp it up a little bit faster than they are, but I like their move.

Matthew Frankel, CFP owns shares of Iron Mountain and Public Storage. The Motley Fool owns shares of and recommends Iron Mountain. The Motley Fool has a disclosure policy.

Stocks Mentioned

Iron Mountain Stock Quote
Iron Mountain
IRM
$54.67 (-0.58%) $0.32

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.