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Does EXFO Inc.'s (TSE:EXF) CEO Pay Matter?

Simply Wall St

Philippe Morin became the CEO of EXFO Inc. (TSE:EXF) in 2017. First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for EXFO

How Does Philippe Morin's Compensation Compare With Similar Sized Companies?

According to our data, EXFO Inc. has a market capitalization of CA$299m, and paid its CEO total annual compensation worth US$701k over the year to August 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$409k. We looked at a group of companies with market capitalizations from US$100m to US$400m, and the median CEO total compensation was US$692k.

That means Philippe Morin receives fairly typical remuneration for the CEO of a company that size. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

You can see a visual representation of the CEO compensation at EXFO, below.

TSX:EXF CEO Compensation, October 25th 2019

Is EXFO Inc. Growing?

EXFO Inc. has reduced its earnings per share by an average of 99% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 6.4% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. The modest increase in revenue in the last year isn't enough to make me overlook the disappointing change in earnings per share. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.

Has EXFO Inc. Been A Good Investment?

Since shareholders would have lost about 6.1% over three years, some EXFO Inc. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

Philippe Morin is paid around what is normal the leaders of comparable size companies.

The company isn't growing EPS, and shareholder returns have been disappointing. Most would consider it prudent for the company to hold off any CEO pay rise until performance improves. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at EXFO.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.