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Is Argan, Inc.'s (NYSE:AGX) CEO Overpaid Relative To Its Peers?

Simply Wall St

Rainer Bosselmann became the CEO of Argan, Inc. (NYSE:AGX) in 2003. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. 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 Argan

How Does Rainer Bosselmann's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Argan, Inc. has a market cap of US$617m, and is paying total annual CEO compensation of US$1.1m. (This is based on the year to January 2019). While we always look at total compensation first, we note that the salary component is less, at US$225k. We examined companies with market caps from US$400m to US$1.6b, and discovered that the median CEO total compensation of that group was US$2.7m.

Most shareholders would consider it a positive that Rainer Bosselmann takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. Though positive, it's important we delve into the performance of the actual business.

You can see a visual representation of the CEO compensation at Argan, below.

NYSE:AGX CEO Compensation, August 30th 2019

Is Argan, Inc. Growing?

On average over the last three years, Argan, Inc. has shrunk earnings per share by 10% each year (measured with a line of best fit). In the last year, its revenue is down -51%.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.

Has Argan, Inc. Been A Good Investment?

Since shareholders would have lost about 12% over three years, some Argan, 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...

It looks like Argan, Inc. pays its CEO less than similar sized companies.

Rainer Bosselmann is paid less than CEOs of similar size companies, but the company isn't growing and total shareholder returns have been disappointing. While one could argue it is appropriate for the CEO to be paid less than other CEOs of similar sized companies, given company performance, we would not call the pay overly generous. Whatever your view on compensation, you might want to check if insiders are buying or selling Argan shares (free trial).

Important note: Argan 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.