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Gary Friedman has been the CEO of RH (NYSE:RH) since 2014, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether RH pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Gary Friedman Compare With Other Companies In The Industry?
Our data indicates that RH has a market capitalization of US$7.1b, and total annual CEO compensation was reported as US$4.0m for the year to February 2020. That's mostly flat as compared to the prior year's compensation. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.3m.
In comparison with other companies in the industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$6.9m. That is to say, Gary Friedman is paid under the industry median. Moreover, Gary Friedman also holds US$675m worth of RH stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 19% of total compensation out of all the companies we analyzed, while other remuneration made up 81% of the pie. It's interesting to note that RH pays out a greater portion of remuneration through salary, compared to the industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
RH has seen its earnings per share (EPS) increase by 743% a year over the past three years. In the last year, its revenue is down 2.9%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has RH Been A Good Investment?
Boasting a total shareholder return of 305% over three years, RH has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As we noted earlier, RH pays its CEO lower than the norm for similar-sized companies belonging to the same industry. When taking into account the company's strong EPS growth over the past three years, it appears CEO compensation is modest. Plus, we can't ignore the impressive shareholder returns, and won't be surprised if some shareholders were to reward such excellent all-around performance with a raise.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 2 warning signs for RH that investors should look into moving forward.
Important note: RH 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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