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Is American Renal Associates Holdings, Inc. (NYSE:ARA) Overpaying Its CEO?

Simply Wall St

Joe Carlucci has been the CEO of American Renal Associates Holdings, Inc. (NYSE:ARA) since 2005. 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.

Check out our latest analysis for American Renal Associates Holdings

How Does Joe Carlucci's Compensation Compare With Similar Sized Companies?

According to our data, American Renal Associates Holdings, Inc. has a market capitalization of US$307m, and paid its CEO total annual compensation worth US$3.6m over the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$927k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$200m to US$800m, and the median CEO total compensation was US$1.7m.

As you can see, Joe Carlucci is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean American Renal Associates Holdings, Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at American Renal Associates Holdings has changed from year to year.

NYSE:ARA CEO Compensation, November 9th 2019

Is American Renal Associates Holdings, Inc. Growing?

Over the last three years American Renal Associates Holdings, Inc. has shrunk its earnings per share by an average of 42% per year (measured with a line of best fit). Its revenue is up 4.8% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has American Renal Associates Holdings, Inc. Been A Good Investment?

With a three year total loss of 52%, American Renal Associates Holdings, Inc. would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared total CEO remuneration at American Renal Associates Holdings, Inc. with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. Just as bad, share price gains for investors have failed to materialize, over the same period. In our opinion the CEO might be paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling American Renal Associates Holdings shares (free trial).

Important note: American Renal Associates Holdings 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.