Leading Orgenesis Inc (NASDAQ:ORGS) as the CEO, Vered Caplan took the company to a valuation of US$108.90M. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. I will break down Caplan’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. View our latest analysis for Orgenesis
What has been the trend in ORGS’s earnings?
Earnings is a powerful indication of ORGS’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Caplan’s performance in the past year. In the past year, ORGS delivered negative earnings of -US$12.37M , which is a further decline from prior year’s loss of -US$11.11M. Furthermore, on average, ORGS has been loss-making in the past, with a 5-year average EPS of -US$1.01. In the situation of unprofitability the company may be incurring a period of reinvestment and growth, or it can be a sign of some headwind. In any event, CEO compensation should mirror the current condition of the business. From the latest financial report, Caplan’s total remuneration more than doubled, reaching US$546.37K , although off a low base. Moreover, Caplan’s pay is also comprised of non-cash items, which means that variabilities in ORGS’s share price can affect the true level of what the CEO actually takes home at the end of the day.
Is ORGS’s CEO overpaid relative to the market?
Despite the fact that there is no cookie-cutter approach, as compensation should be tailored to the specific company and market, we can determine a high-level thresold to see if ORGS deviates substantially from its peers. This outcome can help shareholders ask the right question about Caplan’s incentive alignment. Typically, a US small-cap has a value of $1B, generates earnings of $96M, and remunerates its CEO circa $2.7M annually. Usually I would look at market cap and earnings as a proxy for performance, however, ORGS’s negative earnings lower the usefulness of my formula. Looking at the range of compensation for small-cap executives, it seems like Caplan is being paid within the bounds of reasonableness. Overall, even though ORGS is unprofitable, it seems like the CEO’s pay is fair.
CEO pay is one of those topics of high controversy. Nonetheless, it should be talked about with full transparency from the board to shareholders. Is Caplan remunerated appropriately based on other factors we have not covered today? Is this justified? As a shareholder, you should be aware of how those that represent you (i.e. the board of directors) make decisions on CEO pay and whether their incentives are aligned with yours. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about ORGS’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ORGS? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.