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Does Cosmos Machinery Enterprises Limited's (HKG:118) CEO Pay Reflect Performance?

Simply Wall St

In 2013 Freeman Tang was appointed CEO of Cosmos Machinery Enterprises Limited (HKG:118). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we'll consider growth that the business demonstrates. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Cosmos Machinery Enterprises

How Does Freeman Tang's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Cosmos Machinery Enterprises Limited has a market cap of HK$276m, and is paying total annual CEO compensation of HK$4.4m. (This number is for the twelve months until December 2018). Notably, the salary of HK$4.4m is the vast majority of the CEO compensation. We looked at a group of companies with market capitalizations under HK$1.6b, and the median CEO total compensation was HK$1.9m.

It would therefore appear that Cosmos Machinery Enterprises Limited pays Freeman Tang more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Cosmos Machinery Enterprises has changed over time.

SEHK:118 CEO Compensation, September 12th 2019

Is Cosmos Machinery Enterprises Limited Growing?

Cosmos Machinery Enterprises Limited has increased its earnings per share (EPS) by an average of 93% a year, over the last three years (using a line of best fit). It saw its revenue drop -4.9% over the last year.

This demonstrates that the company has been improving recently. A good result. While it would be good to see revenue growth, profits matter more in the end. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Cosmos Machinery Enterprises Limited Been A Good Investment?

Since shareholders would have lost about 26% over three years, some Cosmos Machinery Enterprises Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by Cosmos Machinery Enterprises Limited, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. However, the returns to investors are far less impressive, over the same period. Considering the per share profit growth, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. So you may want to check if insiders are buying Cosmos Machinery Enterprises shares with their own money (free access).

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.

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.