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Is Canadian Pacific Railway Limited's (TSE:CP) CEO Salary Justified?

Simply Wall St

Keith Creel became the CEO of Canadian Pacific Railway Limited (TSE:CP) in 2017. First, this article will compare CEO compensation with compensation at other large 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 method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Canadian Pacific Railway

How Does Keith Creel's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Canadian Pacific Railway Limited has a market cap of CA$46b, and reported total annual CEO compensation of CA$12m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at CA$1.5m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We took a group of companies with market capitalizations over CA$10b, and calculated the median CEO total compensation to be CA$9.6m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

Thus we can conclude that Keith Creel receives more in total compensation than the median of a group of large companies in the same market as Canadian Pacific Railway Limited. However, this doesn't necessarily mean the pay is too high. 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 Canadian Pacific Railway has changed from year to year.

TSX:CP CEO Compensation, December 31st 2019

Is Canadian Pacific Railway Limited Growing?

Over the last three years Canadian Pacific Railway Limited has grown its earnings per share (EPS) by an average of 16% per year (using a line of best fit). Its revenue is up 10% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Shareholders might be interested in this free visualization of analyst forecasts.

Has Canadian Pacific Railway Limited Been A Good Investment?

I think that the total shareholder return of 79%, over three years, would leave most Canadian Pacific Railway Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We compared the total CEO remuneration paid by Canadian Pacific Railway Limited, and compared it to remuneration at a group of other large 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. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. So you may want to check if insiders are buying Canadian Pacific Railway shares with their own money (free access).

If you want to buy a stock that is better than Canadian Pacific Railway, this free list of high return, low debt companies is a great place to look.

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.

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. Thank you for reading.