Does Emeco Holdings Limited's (ASX:EHL) CEO Pay Reflect Performance?
Ian Testrow has been the CEO of Emeco Holdings Limited (ASX:EHL) since 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
See our latest analysis for Emeco Holdings
How Does Ian Testrow's Compensation Compare With Similar Sized Companies?
According to our data, Emeco Holdings Limited has a market capitalization of AU$408m, and paid its CEO total annual compensation worth AU$11m over the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at AU$1.1m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from AU$151m to AU$605m, and the median CEO total compensation was AU$832k.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Emeco Holdings stands. On an industry level, roughly 63% of total compensation represents salary and 37% is other remuneration. It's interesting to note that Emeco Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry.
It would therefore appear that Emeco Holdings Limited pays Ian Testrow 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 Emeco Holdings has changed over time.
Is Emeco Holdings Limited Growing?
Emeco Holdings Limited has seen earnings per share (EPS) move positively by an average of 123% a year, over the last three years (using a line of best fit). Its revenue is up 12% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. You might want to check this free visual report on analyst forecasts for future earnings.
Has Emeco Holdings Limited Been A Good Investment?
Most shareholders would probably be pleased with Emeco Holdings Limited for providing a total return of 63% 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...
We compared total CEO remuneration at Emeco Holdings Limited with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
However, the earnings per share growth over three years is certainly impressive. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is an important area to keep your eyes on, but we've also identified 4 warning signs for Emeco Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.
If you want to buy a stock that is better than Emeco Holdings, this free list of high return, low debt companies is a great place to look.
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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. Thank you for reading.
