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Is ChinaNet Online Holdings, Inc.’s (NASDAQ:CNET) CEO Overpaid Relative To Its Peers?

Walter Gay

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Handong Cheng became the CEO of ChinaNet Online Holdings, Inc. (NASDAQ:CNET) in 2007. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for ChinaNet Online Holdings

How Does Handong Cheng’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that ChinaNet Online Holdings, Inc. has a market cap of US$28m, and is paying total annual CEO compensation of US$758k. (This is based on the year to 2017). We think total compensation is more important but we note that the CEO salary is lower, at US$24k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO compensation to be US$299k.

Thus we can conclude that Handong Cheng receives more in total compensation than the median of a group of companies in the same market, and of similar size to ChinaNet Online Holdings, Inc.. However, this doesn’t necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at ChinaNet Online Holdings has changed from year to year.

NASDAQCM:CNET CEO Compensation February 14th 19

Is ChinaNet Online Holdings, Inc. Growing?

On average over the last three years, ChinaNet Online Holdings, Inc. has shrunk earnings per share by 8.0% each year (measured with a line of best fit). In the last year, its revenue is up 55%.

As investors, we are a bit wary of companies that have lower earnings per share, over three years. But on the other hand, revenue growth is strong, suggesting a brighter future. These two metric are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. We don’t have analyst forecasts, but you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has ChinaNet Online Holdings, Inc. Been A Good Investment?

ChinaNet Online Holdings, Inc. has not done too badly by shareholders, with a total return of 0.6%, over three years. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary…

We examined the amount ChinaNet Online Holdings, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

One might like to have seen stronger growth, and the shareholder returns have failed to inspire, over the last three years. Considering this, we wouldn’t want to see any big pay rises, although we’d stop short of calling the CEO compensation unfair. So you may want to check if insiders are buying ChinaNet Online Holdings shares with their own money (free access).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.