Why Iron Mountain Stock Might Be Undervalued

Iron Mountain (IRM 0.91%) stands out in the data center realm due to its dividend yield alone. In this clip from "Real Talk" on Motley Fool Live, recorded on March 25, Motley Fool contributor Tyler Crowe discusses why Iron Mountain stock might be undervalued and analyzes where there's still opportunity ahead for the information management company.

Tyler Crowe: I'm probably the weird guy who sees the transition in Iron Mountain more so than others. It would actually be my best pick I think personally. As Matt mentioned, their bread and butter business for a very long time has been physical record storage whether it'd be accounting records for companies, medical records. They did things like fine art storage, intellectual property storage, things like that. It's not a dinosaur business because it is not dying, but you can see the light at the end of the tunnel for physical records. Most companies have to hold physical records for a certain amount of time just for the simple fact of legal compliance reasons. I think Iron Mountain says it's about 13 years per average box of physical records that has to be held there. There is still juice in that business. They can acquire some facilities in emerging markets, and price per box can go up a little bit. There's room on the margin for them to grow for a few more years, but right now I believe, last time I checked, more than 70% of their capital expenditures are going into the data center service business. As that starts to replace the existing business, it gives them that extra juice toward growth and a vision beyond physical assets. If you look at the dividend yield of Iron Mountain, it is much higher than anything you can get in the data center realm right now or the pure players. In that sense, I think it's actually undervalued and there's real opportunity there.