U.S. Markets closed

Is Ambarella, Inc. (NASDAQ:AMBA) Overpaying Its CEO?

Simply Wall St

In 2004 Fermi Wang was appointed CEO of Ambarella, Inc. (NASDAQ:AMBA). 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. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Ambarella

How Does Fermi Wang's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Ambarella, Inc. has a market cap of US$1.5b, and is paying total annual CEO compensation of US$4.1m. (This number is for the twelve months until January 2019). We think total compensation is more important but we note that the CEO salary is lower, at US$357k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$4.1m.

So Fermi Wang receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.

You can see, below, how CEO compensation at Ambarella has changed over time.

NasdaqGS:AMBA CEO Compensation, August 22nd 2019

Is Ambarella, Inc. Growing?

On average over the last three years, Ambarella, Inc. has shrunk earnings per share by 94% each year (measured with a line of best fit). It saw its revenue drop -24% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.

Has Ambarella, Inc. Been A Good Investment?

Given the total loss of 31% over three years, many shareholders in Ambarella, Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Remuneration for Fermi Wang is close enough to the median pay for a CEO of a similar sized company .

The company isn't growing EPS, and shareholder returns have been disappointing. Suffice it to say, we don't think the CEO is underpaid! So you may want to check if insiders are buying Ambarella shares with their own money (free access).

Important note: Ambarella 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 editorial-team@simplywallst.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. Thank you for reading.