Is Arch Coal, Inc. (NYSE:ARCH) Overpaying Its CEO?
In 2012 John Eaves was appointed CEO of Arch Coal, Inc. (NYSE:ARCH). First, this article will compare CEO compensation with compensation at similar sized companies. 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. The aim of all this is to consider the appropriateness of CEO pay levels.
See our latest analysis for Arch Coal
How Does John Eaves's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Arch Coal, Inc. has a market cap of US$1.2b, and reported total annual CEO compensation of US$9.2m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.0m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We examined companies with market caps from US$1.0b to US$3.2b, and discovered that the median CEO total compensation of that group was US$4.1m.
As you can see, John Eaves is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Arch Coal, 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 Arch Coal has changed from year to year.
Is Arch Coal, Inc. Growing?
Over the last three years Arch Coal, Inc. has grown its earnings per share (EPS) by an average of 111% per year (using a line of best fit). In the last year, its revenue is up 1.0%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.
Has Arch Coal, Inc. Been A Good Investment?
With a total shareholder return of 30% over three years, Arch Coal, Inc. shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
In Summary...
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. We also note that, over the same time frame, shareholder returns haven't been bad. So, considering the EPS growth we do not wish to criticize the level of CEO compensation, though we'd recommend further research on management. So you may want to check if insiders are buying Arch Coal shares with their own money (free access).
Important note: Arch Coal 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.
