Todd Alder became the CEO of Orbital Corporation Limited (ASX:OEC) in 2017. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Todd Alder's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Orbital Corporation Limited has a market cap of AU$52m, and reported total annual CEO compensation of AU$483k for the year to June 2019. We think total compensation is more important but we note that the CEO salary is lower, at AU$319k. We examined a group of similar sized companies, with market capitalizations of below AU$308m. The median CEO total compensation in that group is AU$388k.
Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Orbital stands. Speaking on an industry level, we can see that nearly 60% of total compensation represents salary, while the remainder of 40% is other remuneration. Orbital is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation
That means Todd Alder receives fairly typical remuneration for the CEO of a company that size. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. You can see, below, how CEO compensation at Orbital has changed over time.
Is Orbital Corporation Limited Growing?
Orbital Corporation Limited has reduced its earnings per share by an average of 23% a year, over the last three years (measured with a line of best fit). Its revenue is up 42% over last year.
The reduction in earnings per share, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. You might want to check this free visual report on analyst forecasts for future earnings.
Has Orbital Corporation Limited Been A Good Investment?
Boasting a total shareholder return of 70% over three years, Orbital Corporation Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Todd Alder is paid around what is normal for the leaders of comparable size companies.
While the growth could be better, the shareholder returns are clearly good. So all things considered I'd venture that the CEO pay is appropriate. Moving away from CEO compensation for the moment, we've identified 3 warning signs for Orbital that you should be aware of before investing.
Important note: Orbital 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 email@example.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.
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