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Is The Cato Corporation's (NYSE:CATO) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 1999 John Derham Cato was appointed CEO of The Cato Corporation (NYSE:CATO). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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.

See our latest analysis for Cato

How Does John Derham Cato's Compensation Compare With Similar Sized Companies?

Our data indicates that The Cato Corporation is worth US$413m, and total annual CEO compensation was reported as US$4.3m for the year to February 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.3m. 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$1.9m.

It would therefore appear that The Cato Corporation pays John Derham Cato more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see, below, how CEO compensation at Cato has changed over time.

NYSE:CATO CEO Compensation, October 5th 2019

Is The Cato Corporation Growing?

On average over the last three years, The Cato Corporation has shrunk earnings per share by 34% each year (measured with a line of best fit). Its revenue is down 3.0% over last year.

Unfortunately, earnings per share have trended lower over the last three years. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has The Cato Corporation Been A Good Investment?

Given the total loss of 27% over three years, many shareholders in The Cato Corporation are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared total CEO remuneration at The Cato Corporation with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

We think many shareholders would be underwhelmed with the business growth over the last three years. Over the same period, investors would have come away with nothing in the way of share price gains. Some might well form the view that the CEO is paid too generously! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Cato.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity 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.