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What Does Cara Therapeutics' (NASDAQ:CARA) CEO Pay Reveal?

Simply Wall St
·4 mins read

Derek Chalmers became the CEO of Cara Therapeutics, Inc. (NASDAQ:CARA) in 2004, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Cara Therapeutics.

Check out our latest analysis for Cara Therapeutics

How Does Total Compensation For Derek Chalmers Compare With Other Companies In The Industry?

At the time of writing, our data shows that Cara Therapeutics, Inc. has a market capitalization of US$656m, and reported total annual CEO compensation of US$3.4m for the year to December 2019. Notably, that's an increase of 23% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$560k.

On examining similar-sized companies in the industry with market capitalizations between US$400m and US$1.6b, we discovered that the median CEO total compensation of that group was US$3.5m. This suggests that Cara Therapeutics remunerates its CEO largely in line with the industry average. Furthermore, Derek Chalmers directly owns US$13m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2019

2018

Proportion (2019)

Salary

US$560k

US$542k

16%

Other

US$2.9m

US$2.2m

84%

Total Compensation

US$3.4m

US$2.8m

100%

On an industry level, roughly 24% of total compensation represents salary and 76% is other remuneration. Cara Therapeutics pays a modest slice of remuneration through salary, as compared 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.

ceo-compensation
ceo-compensation

A Look at Cara Therapeutics, Inc.'s Growth Numbers

Over the last three years, Cara Therapeutics, Inc. has shrunk its earnings per share by 8.8% per year. It achieved revenue growth of 19% over the last year.

Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Cara Therapeutics, Inc. Been A Good Investment?

Cara Therapeutics, Inc. has served shareholders reasonably well, with a total return of 12% over three years. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

To Conclude...

As we touched on above, Cara Therapeutics, Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But revenue growth for the company has been quite positive recently. That's why we were hoping for more robust shareholder returns at this time. An additional worry is EPS , which has posted negative growth in the previous three years. We wouldn't say compensation is inappropriate considering the stable performance, but shareholders might want to see some better numbers before warming to the idea of a bump.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 3 warning signs for Cara Therapeutics you should be aware of, and 1 of them can't be ignored.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.