Richard Harpin has been the CEO of HomeServe plc (LON:HSV) since 2004. 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.
How Does Richard Harpin’s Compensation Compare With Similar Sized Companies?
Our data indicates that HomeServe plc is worth UK£3.3b, and total annual CEO compensation is UK£8.6m. (This figure is for the year to March 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at UK£563k. We examined companies with market caps from UK£1.5b to UK£4.8b, and discovered that the median CEO total compensation of that group was UK£1.6m.
Thus we can conclude that Richard Harpin receives more in total compensation than the median of a group of companies in the same market, and of similar size to HomeServe plc. 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 HomeServe has changed from year to year.
Is HomeServe plc Growing?
On average over the last three years, HomeServe plc has grown earnings per share (EPS) by 19% each year (using a line of best fit). Its revenue is up 12% over last year.
This demonstrates that the company has been improving recently. A good result. It’s a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. Shareholders might be interested in this free visualization of analyst forecasts.
Has HomeServe plc Been A Good Investment?
I think that the total shareholder return of 151%, over three years, would leave most HomeServe plc shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We examined the amount HomeServe plc pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. So you may want to check if insiders are buying HomeServe shares with their own money (free access).
Important note: HomeServe 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.
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