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In 2007 Pat McHale was appointed CEO of Graco Inc. (NYSE:GGG). 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 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.
How Does Pat McHale's Compensation Compare With Similar Sized Companies?
According to our data, Graco Inc. has a market capitalization of US$8.0b, and paid its CEO total annual compensation worth US$8.5m over the year to December 2019. We note that's an increase of 33% above last year. We think total compensation is more important but we note that the CEO salary is lower, at US$841k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$4.0b to US$12b, and the median CEO total compensation was US$7.3m.
Next, let's break down remuneration compositions to understand how the industry and company compare with each other. On an industry level, roughly 16% of total compensation represents salary and 84% is other remuneration. Graco sets aside a smaller share of compensation for salary, in comparison to the overall industry.
That means Pat McHale 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. The graphic below shows how CEO compensation at Graco has changed from year to year.
Is Graco Inc. Growing?
On average over the last three years, Graco Inc. has seen earnings per share (EPS) move in a favourable direction by 47% each year (using a line of best fit). Revenue was pretty flat on last year.
This demonstrates that the company has been improving recently. A good result. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. It could be important to check this free visual depiction of what analysts expect for the future.
Has Graco Inc. Been A Good Investment?
Most shareholders would probably be pleased with Graco Inc. for providing a total return of 57% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
Pat McHale is paid around the same as most CEOs of similar size companies.
Few would be critical of the leadership, since returns have been juicy and earnings per share are moving in the right direction. Indeed, many might consider the pay rather modest, given the solid company performance! Shifting gears from CEO pay for a second, we've picked out 1 warning sign for Graco that investors should be aware of in a dynamic business environment.
Important note: Graco may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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