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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Iron Mountain (NYSE:IRM), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Iron Mountain with the means to add long-term value to shareholders.
Iron Mountain's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Iron Mountain grew its EPS by 7.2% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Iron Mountain's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Iron Mountain maintained stable EBIT margins over the last year, all while growing revenue 12% to US$4.7b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Iron Mountain's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Iron Mountain Insiders Aligned With All Shareholders?
Owing to the size of Iron Mountain, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$124m. We note that this amounts to 0.9% of the company, which may be small owing to the sheer size of Iron Mountain but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.
Is Iron Mountain Worth Keeping An Eye On?
One important encouraging feature of Iron Mountain is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. We don't want to rain on the parade too much, but we did also find 2 warning signs for Iron Mountain that you need to be mindful of.
Although Iron Mountain certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.