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This article will reflect on the compensation paid to Phil Frost who has served as CEO of OPKO Health, Inc. (NASDAQ:OPK) since 2007. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for OPKO Health.
Comparing OPKO Health, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that OPKO Health, Inc. has a market capitalization of US$2.0b, and reported total annual CEO compensation of US$1.4m for the year to December 2019. We note that's a decrease of 31% compared to last year. We note that the salary portion, which stands at US$960.0k constitutes the majority of total compensation received by the CEO.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$4.2m. This suggests that Phil Frost is paid below the industry median. Furthermore, Phil Frost directly owns US$588m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 23% of total compensation represents salary and 77% is other remuneration. OPKO Health pays out 68% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at OPKO Health, Inc.'s Growth Numbers
OPKO Health, Inc. has reduced its earnings per share by 9.7% a year over the last three years. It achieved revenue growth of 4.9% over the last year.
Overall this is not a very positive result for shareholders. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has OPKO Health, Inc. Been A Good Investment?
Given the total shareholder loss of 51% over three years, many shareholders in OPKO Health, Inc. are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, OPKO Health pays its CEO lower than the norm for similar-sized companies belonging to the same industry. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. We can't say the CEO compensation is high, but shareholders will be cold to a bump at this stage, considering negative investor returns.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for OPKO Health that investors should be aware of in a dynamic business environment.
Important note: OPKO Health is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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