Dave Shaffer became the CEO of EnerSys (NYSE:ENS) in 2016, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing EnerSys' CEO Compensation With the industry
According to our data, EnerSys has a market capitalization of US$3.0b, and paid its CEO total annual compensation worth US$5.2m over the year to March 2020. That is, the compensation was roughly the same as last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$940k.
On examining similar-sized companies in the industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$5.2m. This suggests that EnerSys remunerates its CEO largely in line with the industry average. Moreover, Dave Shaffer also holds US$16m worth of EnerSys stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 29% of total compensation represents salary, while the remainder of 71% is other remuneration. EnerSys sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Over the last three years, EnerSys has shrunk its earnings per share by 8.2% per year. It achieved revenue growth of 3.0% over the last year.
Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has EnerSys Been A Good Investment?
EnerSys has generated a total shareholder return of 7.4% over three years, so most shareholders wouldn't be too disappointed. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we noted earlier, EnerSys pays its CEO in line with similar-sized companies belonging to the same industry. EnerSys has had a poor showing when it comes to EPS growth, and it's tough to say that shareholder returns have done much to excite us. This doesn't compare well with CEO compensation, which is largely in line with the industry median. We wouldn't go as far as saying CEO compensation is inappropriate, but we don't think the executive is underpaid.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We've identified 2 warning signs for EnerSys that investors should be aware of in a dynamic business environment.
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.
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