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Does Aura Energy Limited's (ASX:AEE) CEO Salary Reflect Performance?

Simply Wall St

In 2015 Peter Reeve was appointed CEO of Aura Energy Limited (ASX:AEE). 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. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Aura Energy

How Does Peter Reeve's Compensation Compare With Similar Sized Companies?

According to our data, Aura Energy Limited has a market capitalization of AU$7.8m, and paid its CEO total annual compensation worth AU$813k over the year to June 2019. We note that's an increase of 8.7% above last year. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$425k. We took a group of companies with market capitalizations below AU$293m, and calculated the median CEO total compensation to be AU$380k.

Thus we can conclude that Peter Reeve receives more in total compensation than the median of a group of companies in the same market, and of similar size to Aura Energy Limited. However, this doesn't necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at Aura Energy has changed from year to year.

ASX:AEE CEO Compensation, October 27th 2019

Is Aura Energy Limited Growing?

Over the last three years Aura Energy Limited has grown its earnings per share (EPS) by an average of 26% per year (using a line of best fit). It achieved revenue growth of 372% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. Although we don't have analyst forecasts shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Aura Energy Limited Been A Good Investment?

Since shareholders would have lost about 82% over three years, some Aura Energy Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared total CEO remuneration at Aura Energy Limited with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. On the other hand returns to investors over the same period have probably disappointed many. So shareholders might not feel great about the fact that CEO pay increased on last year. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Aura Energy (free visualization of insider trades).

Important note: Aura Energy 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.

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.