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Is Amphastar Pharmaceuticals, Inc.'s (NASDAQ:AMPH) CEO Pay Justified?

Simply Wall St
·4 min read

In 1996 Jack Zhang was appointed CEO of Amphastar Pharmaceuticals, Inc. (NASDAQ:AMPH). 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.

See our latest analysis for Amphastar Pharmaceuticals

How Does Jack Zhang's Compensation Compare With Similar Sized Companies?

Our data indicates that Amphastar Pharmaceuticals, Inc. is worth US$650m, and total annual CEO compensation was reported as US$5.9m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, 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$400m to US$1.6b, we found the median CEO total compensation was US$3.2m.

Next, let's break down remuneration compositions to understand how the industry and company compare with each other. On an industry level, roughly 33% of total compensation represents salary and 67% is other remuneration. Non-salary compensation represents a greater slice of the remuneration pie for Amphastar Pharmaceuticals, in sharp contrast to the overall sector.

It would therefore appear that Amphastar Pharmaceuticals, Inc. pays Jack Zhang 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 Amphastar Pharmaceuticals, below.

NasdaqGS:AMPH CEO Compensation March 29th 2020
NasdaqGS:AMPH CEO Compensation March 29th 2020

Is Amphastar Pharmaceuticals, Inc. Growing?

Amphastar Pharmaceuticals, Inc. has seen earnings per share (EPS) move positively by an average of 85% a year, over the last three years (using a line of best fit). It achieved revenue growth of 9.4% over the last year.

This demonstrates that the company has been improving recently. A good result. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. You might want to check this free visual report on analyst forecasts for future earnings.

Has Amphastar Pharmaceuticals, Inc. Been A Good Investment?

With a three year total loss of 3.0%, Amphastar Pharmaceuticals, Inc. would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared total CEO remuneration at Amphastar Pharmaceuticals, Inc. with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

However we must not forget that the EPS growth has been very strong over three years. On the other hand returns to investors over the same period have probably disappointed many. Considering positive per-share earnings movement, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. Moving away from CEO compensation for the moment, we've identified 2 warning signs for Amphastar Pharmaceuticals that you should be aware of before investing.

Important note: Amphastar Pharmaceuticals 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 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.

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. Thank you for reading.