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John Higgins became the CEO of Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) in 2007, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Ligand Pharmaceuticals pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For John Higgins Compare With Other Companies In The Industry?
According to our data, Ligand Pharmaceuticals Incorporated has a market capitalization of US$1.8b, and paid its CEO total annual compensation worth US$6.8m over the year to December 2019. That's just a smallish increase of 7.4% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$648k.
In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$4.2m. Accordingly, our analysis reveals that Ligand Pharmaceuticals Incorporated pays John Higgins north of the industry median. Moreover, John Higgins also holds US$23m worth of Ligand Pharmaceuticals stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 23% of total compensation out of all the companies we analyzed, while other remuneration made up 77% of the pie. It's interesting to note that Ligand Pharmaceuticals 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.
Ligand Pharmaceuticals Incorporated's Growth
Ligand Pharmaceuticals Incorporated has seen its earnings per share (EPS) increase by 46% a year over the past three years. It saw its revenue drop 27% over the last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Ligand Pharmaceuticals Incorporated Been A Good Investment?
With a three year total loss of 9.5% for the shareholders, Ligand Pharmaceuticals Incorporated would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, Ligand Pharmaceuticals pays its CEO higher than the norm for similar-sized companies belonging to the same industry. However, the EPS growth is certainly impressive, but it's disappointing to see negative shareholder returns over the same period. Although we'd stop short of calling it inappropriate, we think John is earning a very handsome sum.
CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 2 warning signs (and 1 which doesn't sit too well with us) in Ligand Pharmaceuticals we think you should know about.
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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