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Does Cara Therapeutics, Inc.'s (NASDAQ:CARA) CEO Pay Reflect Performance?

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Simply Wall St
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Derek Chalmers became the CEO of Cara Therapeutics, Inc. (NASDAQ:CARA) in 2004. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Cara Therapeutics

How Does Derek Chalmers's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Cara Therapeutics, Inc. has a market cap of US$1.1b, and is paying total annual CEO compensation of US$2.8m. (This number is for the twelve months until December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$542k. We examined companies with market caps from US$400m to US$1.6b, and discovered that the median CEO total compensation of that group was US$2.7m.

That means Derek Chalmers receives fairly typical remuneration for the CEO of a company that size. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance.

You can see, below, how CEO compensation at Cara Therapeutics has changed over time.

NasdaqGM:CARA CEO Compensation, August 19th 2019
NasdaqGM:CARA CEO Compensation, August 19th 2019

Is Cara Therapeutics, Inc. Growing?

On average over the last three years, Cara Therapeutics, Inc. has shrunk earnings per share by 3.9% each year (measured with a line of best fit). It achieved revenue growth of 602% over the last year.

As investors, we are a bit wary of companies that have lower earnings per share, over three years. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has Cara Therapeutics, Inc. Been A Good Investment?

I think that the total shareholder return of 285%, over three years, would leave most Cara Therapeutics, Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Derek Chalmers is paid around the same as most CEOs of similar size companies.

While the growth could be better, the shareholder returns are clearly good. So considering most shareholders would be happy, we'd say the CEO pay is appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Cara Therapeutics shares (free trial).

Important note: Cara Therapeutics 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.