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Does EDP - Energias de Portugal, S.A.'s (ELI:EDP) CEO Pay Compare Well With Peers?

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Simply Wall St
·4 min read
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The CEO of EDP - Energias de Portugal, S.A. (ELI:EDP) is António Luís Guerra Nunes Mexia. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big 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. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for EDP - Energias de Portugal

How Does António Luís Guerra Nunes Mexia's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that EDP - Energias de Portugal, S.A. has a market cap of €14b, and reported total annual CEO compensation of €2.2m for the year to December 2019. That's less than last year. We think total compensation is more important but we note that the CEO salary is lower, at €1.0m. We took a group of companies with market capitalizations over €7.4b, and calculated the median CEO total compensation to be €3.6m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

Next, let's break down remuneration compositions to understand how the industry and company compare with each other. Speaking on an industry level, we can see that nearly 64% of total compensation represents salary, while the remainder of 36% is other remuneration. So it seems like there isn't a significant difference between EDP - Energias de Portugal and the broader market, in terms of salary allocation in the overall compensation package.

Most shareholders would consider it a positive that António Luís Guerra Nunes Mexia takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance. You can see, below, how CEO compensation at EDP - Energias de Portugal has changed over time.

ENXTLS:EDP CEO Compensation May 14th 2020
ENXTLS:EDP CEO Compensation May 14th 2020

Is EDP - Energias de Portugal, S.A. Growing?

EDP - Energias de Portugal, S.A. has reduced its earnings per share by an average of 31% a year, over the last three years (measured with a line of best fit). It saw its revenue drop 6.0% over the last year.

Sadly for shareholders, earnings per share are actually down, over three years. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.

Has EDP - Energias de Portugal, S.A. Been A Good Investment?

Most shareholders would probably be pleased with EDP - Energias de Portugal, S.A. for providing a total return of 53% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

It appears that EDP - Energias de Portugal, S.A. remunerates its CEO below most large companies.

It's well worth noting that while António Luís Guerra Nunes Mexia is paid less than most company leaders (at larger companies), there isn't much EPS growth. Having said that, returns to shareholders have been great. Although we could see higher EPS growth, we'd argue the remuneration is not an issue, based on these observations. On another note, EDP - Energias de Portugal has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you want to buy a stock that is better than EDP - Energias de Portugal, this free list of high return, low debt companies is a great place to look.

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.

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. Thank you for reading.