Steve Davis became the CEO of ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) in 2015, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing ACADIA Pharmaceuticals Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that ACADIA Pharmaceuticals Inc. has a market capitalization of US$6.0b, and reported total annual CEO compensation of US$7.6m for the year to December 2019. That's a notable increase of 17% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$744k.
On examining similar-sized companies in the industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$6.5m. So it looks like ACADIA Pharmaceuticals compensates Steve Davis in line with the median for the industry. Moreover, Steve Davis also holds US$453k worth of ACADIA Pharmaceuticals stock directly under their own name.
On an industry level, roughly 23% of total compensation represents salary and 77% is other remuneration. ACADIA Pharmaceuticals pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
ACADIA Pharmaceuticals Inc.'s Growth
ACADIA Pharmaceuticals Inc.'s earnings per share (EPS) grew 16% per year over the last three years. In the last year, its revenue is up 49%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. 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 ACADIA Pharmaceuticals Inc. Been A Good Investment?
ACADIA Pharmaceuticals Inc. has served shareholders reasonably well, with a total return of 15% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
As we noted earlier, ACADIA Pharmaceuticals pays its CEO in line with similar-sized companies belonging to the same industry. But EPS growth for the company has been strong over the last three years, though shareholder returns in comparison haven't been as impressive. So considering these factors, we think the compensation is probably quite reasonable, but investor returns need a boost moving forward.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for ACADIA Pharmaceuticals that you should be aware of before investing.
Important note: ACADIA Pharmaceuticals is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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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