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Does Psychemedics Corporation's (NASDAQ:PMD) CEO Pay Matter?

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Simply Wall St
·3 min read
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In 1991, Raymond Kubacki was appointed CEO of Psychemedics Corporation (NASDAQ:PMD). 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. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Psychemedics

How Does Raymond Kubacki's Compensation Compare With Similar Sized Companies?

According to our data, Psychemedics Corporation has a market capitalization of US$28m, and paid its CEO total annual compensation worth US$737k over the year to December 2019. That's less than last year. While we always look at total compensation first, we note that the salary component is less, at US$525k. We examined a group of similar sized companies, with market capitalizations of below US$200m. The median CEO total compensation in that group is US$589k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Psychemedics stands. On a sector level, around 17% of total compensation represents salary and 83% is other remuneration. According to our research, Psychemedics has allocated a higher percentage of pay to salary in comparison to the broader sector.

So Raymond Kubacki receives a similar amount to the median CEO pay, amongst the companies we looked at. 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. You can see, below, how CEO compensation at Psychemedics has changed over time.

NasdaqCM:PMD CEO Compensation May 28th 2020
NasdaqCM:PMD CEO Compensation May 28th 2020

Is Psychemedics Corporation Growing?

Over the last three years Psychemedics Corporation has shrunk its earnings per share by an average of 45% per year (measured with a line of best fit). It saw its revenue drop 15% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Psychemedics Corporation Been A Good Investment?

Since shareholders would have lost about 71% over three years, some Psychemedics Corporation shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Remuneration for Raymond Kubacki is close enough to the median pay for a CEO of a similar sized company .

The company isn't growing EPS, and shareholder returns have been disappointing. Few would argue that it's wise for the company to pay any more, before returns improve. Moving away from CEO compensation for the moment, we've identified 4 warning signs for Psychemedics that you should be aware of before investing.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.