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Is ARC Document Solutions, Inc.'s (NYSE:ARC) CEO Pay Justified?

Simply Wall St

Suri Kumarakulasingam has been the CEO of ARC Document Solutions, Inc. (NYSE:ARC) since 2007. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

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Check out our latest analysis for ARC Document Solutions

How Does Suri Kumarakulasingam's Compensation Compare With Similar Sized Companies?

According to our data, ARC Document Solutions, Inc. has a market capitalization of US$99m, and pays its CEO total annual compensation worth US$2.4m. (This number is for the twelve months until December 2018). We note that's an increase of 63% above last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$823k. We examined a group of similar sized companies, with market capitalizations of below US$200m. The median CEO total compensation in that group is US$452k.

It would therefore appear that ARC Document Solutions, Inc. pays Suri Kumarakulasingam 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, below, how CEO compensation at ARC Document Solutions has changed over time.

NYSE:ARC CEO Compensation, May 24th 2019

Is ARC Document Solutions, Inc. Growing?

ARC Document Solutions, Inc. has reduced its earnings per share by an average of 26% a year, over the last three years (measured with a line of best fit). Its revenue is up 1.7% over last year.

Unfortunately, earnings per share have trended lower over the last three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has ARC Document Solutions, Inc. Been A Good Investment?

Since shareholders would have lost about 49% over three years, some ARC Document Solutions, Inc. shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We examined the amount ARC Document Solutions, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

We think many shareholders would be underwhelmed with the business growth over the last three years.

Arguably worse, investors are without a positive return for the last three years. Notably, the CEO remuneration is actually up on last year. Some might well form the view that the CEO is paid too generously! Shareholders may want to check for free if ARC Document Solutions insiders are buying or selling shares.

Important note: ARC Document Solutions 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.