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Is Avon Rubber p.l.c. (LON:AVON) Excessively Paying Its CEO?

Simply Wall St

Paul McDonald became the CEO of Avon Rubber p.l.c. (LON:AVON) in 2017. 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 - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Avon Rubber

How Does Paul McDonald's Compensation Compare With Similar Sized Companies?

According to our data, Avon Rubber p.l.c. has a market capitalization of UK£522m, and paid its CEO total annual compensation worth UK£804k over the year to September 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at UK£314k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from UK£311m to UK£1.2b, and the median CEO total compensation was UK£919k.

So Paul McDonald is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.

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

LSE:AVON CEO Compensation, October 26th 2019

Is Avon Rubber p.l.c. Growing?

On average over the last three years, Avon Rubber p.l.c. has grown earnings per share (EPS) by 1.3% each year (using a line of best fit). It achieved revenue growth of 2.2% over the last year.

I would argue that the improvement in revenue isn't particularly impressive, but the modest improvement in EPS is good. So there are some positives here, but not enough to earn high praise. Shareholders might be interested in this free visualization of analyst forecasts.

Has Avon Rubber p.l.c. Been A Good Investment?

Boasting a total shareholder return of 78% over three years, Avon Rubber p.l.c. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Paul McDonald is paid around the same as most CEOs of similar size companies.

The company isn't showing particularly great growth, but shareholder returns have been pleasing. So all things considered I'd venture that the CEO pay is appropriate. So you may want to check if insiders are buying Avon Rubber shares with their own money (free access).

Important note: Avon Rubber 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.