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Is Echelon Financial Holdings Inc.'s (TSE:EFH) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2016 Serge Lavoie was appointed CEO of Echelon Financial Holdings Inc. (TSE:EFH). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Echelon Financial Holdings

How Does Serge Lavoie's Compensation Compare With Similar Sized Companies?

According to our data, Echelon Financial Holdings Inc. has a market capitalization of CA$72m, and paid its CEO total annual compensation worth CA$984k over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at CA$409k. We took a group of companies with market capitalizations below CA$266m, and calculated the median CEO total compensation to be CA$208k.

Thus we can conclude that Serge Lavoie receives more in total compensation than the median of a group of companies in the same market, and of similar size to Echelon Financial Holdings Inc.. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see a visual representation of the CEO compensation at Echelon Financial Holdings, below.

TSX:EFH CEO Compensation, February 27th 2020

Is Echelon Financial Holdings Inc. Growing?

Echelon Financial Holdings Inc. has reduced its earnings per share by an average of 85% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 13% over the last year.

Unfortunately, earnings per share have trended lower over the last three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Echelon Financial Holdings Inc. Been A Good Investment?

Most shareholders would probably be pleased with Echelon Financial Holdings Inc. for providing a total return of 34% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We examined the amount Echelon Financial Holdings Inc. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Neither earnings per share nor revenue have been growing sufficiently to impress us, over the last three years. However, we can't argue with the strong returns to shareholders, over the same time period. So on this analysis we'd stop short of criticizing the level of CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Echelon Financial Holdings shares (free trial).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

If you spot an error that warrants correction, please contact the editor at 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.