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Is Applied Optoelectronics, Inc.'s (NASDAQ:AAOI) CEO Being Overpaid?

Simply Wall St

Thompson Lin has been the CEO of Applied Optoelectronics, Inc. (NASDAQ:AAOI) since 1997. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. 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.

Check out our latest analysis for Applied Optoelectronics

How Does Thompson Lin's Compensation Compare With Similar Sized Companies?

According to our data, Applied Optoelectronics, Inc. has a market capitalization of US$170m, and pays its CEO total annual compensation worth US$4.7m. (This number is for the twelve months until December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$533k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$100m to US$400m. The median total CEO compensation was US$1.2m.

Thus we can conclude that Thompson Lin receives more in total compensation than the median of a group of companies in the same market, and of similar size to Applied Optoelectronics, Inc.. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

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

NasdaqGM:AAOI CEO Compensation, August 29th 2019

Is Applied Optoelectronics, Inc. Growing?

Over the last three years Applied Optoelectronics, Inc. has shrunk its earnings per share by an average of 46% per year (measured with a line of best fit). In the last year, its revenue is down -35%.

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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.

Has Applied Optoelectronics, Inc. Been A Good Investment?

Since shareholders would have lost about 50% over three years, some Applied Optoelectronics, Inc. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by Applied Optoelectronics, Inc., and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

Arguably worse, investors are without a positive return for the last three years. This analysis suggests to us that the CEO is paid too generously! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Applied Optoelectronics.

Important note: Applied Optoelectronics 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.