Todd Nelson became the CEO of Career Education Corporation (NASDAQ:CECO) in 2015. 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 - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Todd Nelson's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Career Education Corporation has a market cap of US$1.4b, and is paying total annual CEO compensation of US$7.2m. (This number is for the twelve months until December 2018). While we always look at total compensation first, we note that the salary component is less, at US$770k. When we examined a selection of companies with market caps ranging from US$1.0b to US$3.2b, we found the median CEO total compensation was US$4.0m.
Thus we can conclude that Todd Nelson receives more in total compensation than the median of a group of companies in the same market, and of similar size to Career Education Corporation. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Career Education has changed from year to year.
Is Career Education Corporation Growing?
On average over the last three years, Career Education Corporation has shrunk earnings per share by 51% each year (measured with a line of best fit). Its revenue is up 1.5% over last year.
Unfortunately, earnings per share have trended lower over the last three years. And the modest revenue growth over 12 months isn't much comfort against the reduced earnings per share. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.
Has Career Education Corporation Been A Good Investment?
I think that the total shareholder return of 202%, over three years, would leave most Career Education Corporation 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.
We examined the amount Career Education Corporation pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
We think many shareholders would be underwhelmed with the business growth over the last three years.
But clearly there are some positives, because investors have done well over the same time frame. Given this situation we doubt shareholders are particularly concerned about the CEO compensation. Shareholders may want to check for free if Career Education insiders are buying or selling shares.
Important note: Career Education 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.
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