In 2012 Chip Paucek was appointed CEO of 2U, Inc. (NASDAQ:TWOU). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Chip Paucek's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that 2U, Inc. has a market cap of US$1.2b, and reported total annual CEO compensation of US$17m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$541k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.6m.
It would therefore appear that 2U, Inc. pays Chip Paucek more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at 2U, below.
Is 2U, Inc. Growing?
Over the last three years 2U, Inc. has shrunk its earnings per share by an average of 23% per year (measured with a line of best fit). It achieved revenue growth of 38% over the last year.
Investors should note that, over three years, earnings per share are down. On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. You might want to check this free visual report on analyst forecasts for future earnings.
Has 2U, Inc. Been A Good Investment?
With a three year total loss of 43%, 2U, Inc. would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
We examined the amount 2U, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Considering this, we have the opinion that the CEO pay is more on the generous side, than the modest side. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling 2U (free visualization of insider trades).
Important note: 2U may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.