Iron Mountain Incorporated (IRM)’s CFO Is Buying on Bad News

Peers for Iron Mountain Incorporated (NYSE:IRM) include data integration and storage services companies Informatica Corporation (NASDAQ:INFA), EMC Corporation (NYSE:EMC), and NetApp Inc. (NASDAQ:NTAP). Trailing earnings multiples are high at these three peers as well, though the sell-side is optimistic on each’s prospects. EMC Corporation (NYSE:EMC) and NetApp Inc. (NASDAQ:NTAP) would actually be value plays if analyst forecasts proved correct, as those stocks’ forward P/Es both clock in at 12. Last quarter each of those two companies experienced a small decline in earnings, however, with only modest growth in revenue, and so we’d be skeptical of the optimism in these projections. Certainly we wouldn’t be buying either EMC or NetApp without more positive news. Informatica Corporation (NASDAQ:INFA) is in a similar boat: even after a 14% decline in price over the last year, it is valued at over 20 times forward earnings estimates. Again, that figure already assumes that net income will increase significantly from current levels over the next year and a half. While revenue did rise 9% last quarter compared to the first quarter of 2012, earnings fell over 30%. We’d certainly avoid being long, and any of these three companies might actually be worth researching as short targets if anything.

With Iron Mountain looking fairly pricy in terms of forward estimates, then, it’s possible that it is just trading in line with the industry rather than with a continued perception that the company stands a good chance of being approved for REIT conversion. Still, REIT status seems speculative at this point and the valuation is too high for us to recommend Iron Mountain on value terms. Even taking into account the insider purchase, then, we would avoid the stock.

Disclosure: I own no shares of any stocks mentioned in this article.