U.S. Markets open in 1 hr 5 mins

Is Conatus Pharmaceuticals Inc.’s (NASDAQ:CNAT) CEO Pay Justified?

Rowena Gregory

Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!

Steven Mento became the CEO of Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) in 2005. First, this article will compare CEO compensation with compensation at similar sized companies. 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.

See our latest analysis for Conatus Pharmaceuticals

How Does Steven Mento’s Compensation Compare With Similar Sized Companies?

According to our data, Conatus Pharmaceuticals Inc. has a market capitalization of US$57m, and pays its CEO total annual compensation worth US$1.3m. (This number is for the twelve months until December 2017). We think total compensation is more important but we note that the CEO salary is lower, at US$521k. 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 Steven Mento receives more in total compensation than the median of a group of companies in the same market, and of similar size to Conatus Pharmaceuticals 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 Conatus Pharmaceuticals has changed from year to year.

NasdaqGM:CNAT CEO Compensation, February 25th 2019

Is Conatus Pharmaceuticals Inc. Growing?

On average over the last three years, Conatus Pharmaceuticals Inc. has grown earnings per share (EPS) by 30% each year (using a line of best fit). It achieved revenue growth of 28% over the last year.

This demonstrates that the company has been improving recently. A good result. It’s great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Shareholders might be interested in this free visualization of analyst forecasts.

Has Conatus Pharmaceuticals Inc. Been A Good Investment?

Conatus Pharmaceuticals Inc. has not done too badly by shareholders, with a total return of 5.6%, over three years. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

We compared the total CEO remuneration paid by Conatus Pharmaceuticals Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

However we must not forget that the EPS growth has been very strong over three years. We also note that, over the same time frame, shareholder returns haven’t been bad. While it may be worth researching further, we don’t see a problem with the CEO pay, given the good EPS growth. So you may want to check if insiders are buying Conatus Pharmaceuticals shares with their own money (free access).

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.