John Eaves has been the CEO of Arch Coal, Inc. (NYSE:ARCH) since 2012. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does John Eaves's Compensation Compare With Similar Sized Companies?
According to our data, Arch Coal, Inc. has a market capitalization of US$523m, and paid its CEO total annual compensation worth US$2.9m over the year to December 2019. That's less than last year. While we always look at total compensation first, we note that the salary component is less, at US$1.0m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from US$200m to US$800m, and the median CEO total compensation was US$2.1m.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Arch Coal stands. On a sector level, around 18% of total compensation represents salary and 82% is other remuneration. It's interesting to note that Arch Coal pays out a greater portion of remuneration through salary, in comparison to the wider industry.
Thus we can conclude that John Eaves receives more in total compensation than the median of a group of companies in the same market, and of similar size to Arch Coal, Inc.. However, this doesn't necessarily mean the pay 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 Arch Coal, below.
Is Arch Coal, Inc. Growing?
On average over the last three years, Arch Coal, Inc. has seen earnings per share (EPS) move in a favourable direction by 18% each year (using a line of best fit). It saw its revenue drop 7.2% over the last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. You might want to check this free visual report on analyst forecasts for future earnings.
Has Arch Coal, Inc. Been A Good Investment?
Given the total loss of 48% over three years, many shareholders in Arch Coal, Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared the total CEO remuneration paid by Arch Coal, 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.
However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Taking a breather from CEO compensation, we've spotted 4 warning signs for Arch Coal (of which 1 is concerning!) you should know about in order to have a holistic understanding of the stock.
If you want to buy a stock that is better than Arch Coal, this free list of high return, low debt companies is a great place to look.
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