Iron Mountain Down 23% From Its 1-Year High—Is It Undervalued?

Key Points

• Legacy records management Iron Mountain's REIT focuses on capital deployment on its colocation data center network.
• With a defensive moat and a dividend payout that has increased for nine consecutive years, IRM is an ideal fit for buy-and-hold income portfolios.
• Based on its fundamentals, the stock is currently undervalued, presenting an opportunity for value investors. 

With the Federal Reserve eyeing inflation and pausing cuts, interest rate-sensitive sectors have faced challenges. Real estate’s 1.57% gain in 2025 has been the fourth-worst year-to-date performance of the S&P 500’s 11 sectors, trailing only energy (0.55%), consumer discretionary (-2.18%), and healthcare (-2.41%). 

Much of that’s a consequence of the Fed’s aforementioned rate policy, but on a granular level, there are headwinds impacting subsets of the real estate sector. Housing starts are at a five-year low as homebuilders respond to waning buyer demand. Meanwhile, office occupancy continues to struggle with nationwide vacancy just shy of 20%. 

But in some corners of real estate, those macro conditions have muted impacts. For Boston-based Iron Mountain NYSE: IRM, that’s precisely the case. Founded in 1951, the company converted to a real estate investment trust (REIT) in 2014. As it expanded from legacy records management company to colocation data center operator, the stock is currently undervalued given its sound fundamentals and long-term prospects.

Transitioning to a Digital Future

Over the course of 74 years, Iron Mountain has amassed 240,000 customers spanning 61 countries, including nearly 95% of Fortune 1000 companies. Though its offerings have evolved, the REIT continues to help organizations unlock value through services including information management, digital transformation, information security, and data center/asset lifecycle management needs.

That’s resulted in a track record of rewarding shareholders and maintaining clients since Nixon’s presidency. Iron Mountain’s customer retention is 98%, and as it continues expanding its data center network, the trust’s fundamentals support management’s decision to focus on that business line. 

In its Q1 earnings presentation, the REIT announced that it now has 1,350 facilities boasting over 730 million cubic feet, including a data center portfolio with: 

• 424 megawatts (MW) of operating capacity, 96% of which is currently leased
• 185 MW of data center capacity under construction, 79% of which is pre-leased
• 671 MW of data center capacity being held for development

That space and capacity come at a cost, so Iron Mountain’s free cash flow fell from $44.11 million in 2022 to negative $594.86 million in 2024. However, that capex focus is already bearing fruit. Over the same period, total revenue increased 20.58% (from $5.10 billion to $6.15 billion), net income increased 18.55% (from $2.91 billion to $3.45 billion), and total assets increased 15.98% (from $16.14 billion to $18.72 billion). 

While total debt grew from $13.29 billion to $16.37 billion and net income shrank from $556.98 million to $180.16 million. Those margins should continue to improve alongside the rapid expansion of the data center industry.

AI-Driven Data Center Demand          

The global data center market is forecast to undergo a CAGR of 11.2% from 2025 to 2030, from $347.60 billion to $652.01 billion. The majority of that will be attributed to AI, machine learning, and their resultant data processing and storage requirements.

While North America is the largest data center market, Asia Pacific is growing the fastest. Accordingly, Iron Mountain’s network includes a significant presence in both markets, including locations in Singapore and India. 

That network has enabled the REIT to continue accommodating its clients—names like Microsoft NASDAQ: MSFT, International Business Machines NYSE: IBM, and Deloitte—in their growing demand for scalable and efficient data management solutions.

Is Iron Mountain Undervalued?

The smart money seems to think so. Of the REIT’s 295 million shares outstanding, 83.89% are held by institutional investors. Atop that list are the three largest buy-side firms: Vanguard, BlackRock, and State Street, which collectively hold 98.75 million shares. According to Q1 form 13-F filings, IRM saw institutions purchase 27.02 million shares versus 16.02 million shares sold. 

The stock’s trading at a forward P/E of 48.84 with an average five-year forward P/E of 34.32—an enormous improvement upon its TTM P/E of 239. That’s factored into Wall Street analysts assigning the stock a Buy rating with an average price target of $121.71, good for 23.99% upside from today’s price. 

Shares are trading 23% lower than their one-year high in October 2024 but are up 27% from their one-year low in April 2025. IRM’s dividend payout has increased for nine consecutive years and currently yields 3.20%.

The company will announce Q2 financial results before market open on Aug. 6, 2025. Investors looking to gain exposure to a REIT with the potential to outperform the broad sector should consider opening positions before then.