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Is Community Health Systems, Inc. (NYSE:CYH) Overpaying Its CEO?

Simply Wall St

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In 1997 Wayne Smith was appointed CEO of Community Health Systems, Inc. (NYSE:CYH). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. 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.

Check out our latest analysis for Community Health Systems

How Does Wayne Smith's Compensation Compare With Similar Sized Companies?

Our data indicates that Community Health Systems, Inc. is worth US$279m, and total annual CEO compensation is US$7.0m. (This is based on the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.6m. When we examined a selection of companies with market caps ranging from US$100m to US$400m, we found the median CEO total compensation was US$1.2m.

Thus we can conclude that Wayne Smith receives more in total compensation than the median of a group of companies in the same market, and of similar size to Community Health Systems, 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.

You can see, below, how CEO compensation at Community Health Systems has changed over time.

NYSE:CYH CEO Compensation, July 15th 2019

Is Community Health Systems, Inc. Growing?

Community Health Systems, Inc. has reduced its earnings per share by an average of 15% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is down -4.9%.

Sadly for shareholders, earnings per share are actually down, over three years. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.

Has Community Health Systems, Inc. Been A Good Investment?

Since shareholders would have lost about 81% over three years, some Community Health Systems, Inc. shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We compared total CEO remuneration at Community Health Systems, Inc. with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

We think many shareholders would be underwhelmed with the business growth over the last three years.

Arguably worse, investors are without a positive return for the last three years. In our opinion the CEO might be paid too generously! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Community Health Systems.

Important note: Community Health Systems 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.