Iron Mountain Nearing Plateau

We are encouraged by Iron Mountain Incorporated's (IRM) continued momentum throughout 2007 and early 2008, as the company reported its 77th consecutive quarter of increased storage revenues. The company has a strong balance sheet with $107.4 million in cash and cash equivalents ended March 31, 2008.

While we remain encouraged by strength in Iron Mountain's storage services business, much of the company's growth has been through acquisitions, which involves integration risk. This becomes more difficult with the company's growing revenue base as it will be required to make larger acquisitions.

Shares of Iron Mountain are currently trading at 33.4x our 2008 earnings estimate of $0.77, representing a large premium to the industry mean and the S&P. On a P/S ratio, the stock is trading at 1.7x our 2008 sales estimate of $15.26 per share, also representing a premium to its industry mean and median.

As long as the company continues to perform at a high level, we believe the shares can maintain their current valuation, and perhaps increase slightly, but would not chase the stock at current levels. We therefore maintain a Hold rating on IRM shares, and set our six-month price target to $27.00, based on a P/S multiple of 1.8x our 2008 sales estimate, the high-end of its peer group range.

Downturn for Publisher Meredith

Meredith Corp (MDP) is a best-of-breed publishing house, boasting a lengthy track record superior free cash flow growth and returns on invested capital. Nevertheless, the company is suffering from the secular downturn occurring in the print media industry, exacerbated by a tightening vise of slowing economic growth and rising paper and postage costs.

The gold standard in publishing, Meredith's portfolio of women's magazines have a strong track record of relatively stable circulation and ad revenue and superior investment returns. Looking forward, the company's revenue and earnings growth should be bolstered by international expansion. However, circulation revenue is declining (down nearly 5.4 percent in the first nine months of fiscal 2008) and we expect ad revenue to fall at a low-to-mid double-digit rate over the next couple quarters.

Worse than the cyclical slowdown, in our view, are secular pressures that will erode fundamentals over the long-term. We continue to see no visibility on improvement in circulation as the print industry loses share to the Internet, and growth in Meredith's online operations will not likely fill the gap, in our opinion.