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M. Kathwari has been the CEO of Ethan Allen Interiors Inc. (NYSE:ETH) since 1988. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does M. Kathwari’s Compensation Compare With Similar Sized Companies?
Our data indicates that Ethan Allen Interiors Inc. is worth US$514m, and total annual CEO compensation is US$2.9m. (This is based on the year to 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.2m. When we examined a selection of companies with market caps ranging from US$200m to US$800m, we found the median CEO compensation was US$1.5m.
It would therefore appear that Ethan Allen Interiors Inc. pays M. Kathwari more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Ethan Allen Interiors has changed over time.
Is Ethan Allen Interiors Inc. Growing?
Over the last three years Ethan Allen Interiors Inc. has shrunk its earnings per share by an average of 14% per year (measured with a line of best fit). Its revenue is up 2.2% over last year.
Unfortunately, earnings per share have trended lower over the last three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has Ethan Allen Interiors Inc. Been A Good Investment?
Given the total loss of 19% over three years, many shareholders in Ethan Allen Interiors Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
We examined the amount Ethan Allen Interiors Inc. pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
Arguably worse, investors are without a positive return for the last three years. In our opinion the CEO might be paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling Ethan Allen Interiors shares (free trial).
Important note: Ethan Allen Interiors 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.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.