Tom Greco became the CEO of Advance Auto Parts, Inc. (NYSE:AAP) in 2016. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Tom Greco's Compensation Compare With Similar Sized Companies?
Our data indicates that Advance Auto Parts, Inc. is worth US$8.7b, and total annual CEO compensation was reported as US$7.7m for the year to December 2019. That's less than last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.1m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a selection of companies with market caps ranging from US$4.0b to US$12b, we found the median CEO total compensation was US$7.4m.
Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Advance Auto Parts. On an industry level, roughly 18% of total compensation represents salary and 82% is other remuneration. Advance Auto Parts does not set aside a larger portion of remuneration in the form of salary, maintaining the same rate as the wider market.
So Tom Greco receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context. You can see a visual representation of the CEO compensation at Advance Auto Parts, below.
Is Advance Auto Parts, Inc. Growing?
Over the last three years Advance Auto Parts, Inc. has seen earnings per share (EPS) move in a positive direction by an average of 4.8% per year (using a line of best fit). Its revenue is up 1.3% over last year.
I would argue that the improvement in revenue isn't particularly impressive, but I'm happy with the modest EPS growth. So there are some positives here, but not enough to earn high praise. You might want to check this free visual report on analyst forecasts for future earnings.
Has Advance Auto Parts, Inc. Been A Good Investment?
Given the total loss of 13% over three years, many shareholders in Advance Auto Parts, Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
Remuneration for Tom Greco is close enough to the median pay for a CEO of a similar sized company .
The per share growth could be better, in our view. And it's hard to argue that the returns over the last three years have delighted. So many would argue that the CEO is certainly not underpaid. On another note, we've spotted 1 warning sign for Advance Auto Parts that investors should look into moving forward.
Important note: Advance Auto Parts 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.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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