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Does Lipocine Inc.’s (NASDAQ:LPCN) CEO Pay Reflect Performance?

Simply Wall St

Mahesh Patel became the CEO of Lipocine Inc. (NASDAQ:LPCN) in 1997. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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 method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Lipocine

How Does Mahesh Patel’s Compensation Compare With Similar Sized Companies?

Our data indicates that Lipocine Inc. is worth US$37m, and total annual CEO compensation is US$1.3m. (This number is for the twelve months until December 2017). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$435k. We looked at a group of companies with market capitalizations under US$200m, and the median CEO compensation was US$297k.

It would therefore appear that Lipocine Inc. pays Mahesh Patel 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. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

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

NasdaqCM:LPCN CEO Compensation, February 26th 2019

Is Lipocine Inc. Growing?

Over the last three years Lipocine Inc. has grown its earnings per share (EPS) by an average of 16% per year (using a line of best fit). It achieved revenue growth of 12% over the last year.

This demonstrates that the company has been improving recently. A good result. It’s a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. Shareholders might be interested in this free visualization of analyst forecasts.

Has Lipocine Inc. Been A Good Investment?

Since shareholders would have lost about 83% over three years, some Lipocine 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…

We examined the amount Lipocine Inc. pays its CEO, and compared it to the amount paid by similar sized companies. 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 the other hand returns to investors over the same period have probably disappointed many. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. So you may want to check if insiders are buying Lipocine shares with their own money (free access).

Important note: Lipocine 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.

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.