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This article will reflect on the compensation paid to Fermi Wang who has served as CEO of Ambarella, Inc. (NASDAQ:AMBA) since 2004. This analysis will also assess whether Ambarella pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Fermi Wang Compare With Other Companies In The Industry?
According to our data, Ambarella, Inc. has a market capitalization of US$3.5b, and paid its CEO total annual compensation worth US$5.1m over the year to January 2020. Notably, that's an increase of 25% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$368k.
On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$4.7m. This suggests that Ambarella remunerates its CEO largely in line with the industry average. Furthermore, Fermi Wang directly owns US$55m worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. It's interesting to note that Ambarella allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Ambarella, Inc.'s Growth
Ambarella, Inc. has reduced its earnings per share by 83% a year over the last three years. Its revenue is down 2.1% over the previous year.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Ambarella, Inc. Been A Good Investment?
We think that the total shareholder return of 82%, over three years, would leave most Ambarella, Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As we noted earlier, Ambarella pays its CEO in line with similar-sized companies belonging to the same industry. Some investors may take issue with this, especially considering shrinking EPS for the past three years. But on the bright side, shareholder returns have moved northward during the same period. We wouldn't say CEO compensation is too high, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for Ambarella that investors should look into moving forward.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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