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Is Ethan Allen Interiors Inc.'s (NYSE:ETH) CEO Paid Enough Relative To Peers?

Simply Wall St

In 1988 M. Kathwari was appointed CEO of Ethan Allen Interiors Inc. (NYSE:ETH). 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 - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Ethan Allen Interiors

How Does M. Kathwari's Compensation Compare With Similar Sized Companies?

According to our data, Ethan Allen Interiors Inc. has a market capitalization of US$514m, and pays its CEO total annual compensation worth US$2.9m. (This number is for the twelve months until June 2018). While we always look at total compensation first, we note that the salary component is less, 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 total compensation was US$1.8m.

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. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Ethan Allen Interiors has changed from year to year.

NYSE:ETH CEO Compensation, September 14th 2019
NYSE:ETH CEO Compensation, September 14th 2019

Is Ethan Allen Interiors Inc. Growing?

On average over the last three years, Ethan Allen Interiors Inc. has shrunk earnings per share by 16% each year (measured with a line of best fit). In the last year, its revenue is down -2.6%.

Sadly for shareholders, earnings per share are actually down, over three years. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.

Has Ethan Allen Interiors Inc. Been A Good Investment?

Given the total loss of 29% 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.

In Summary...

We compared total CEO remuneration at Ethan Allen Interiors Inc. with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

Arguably worse, investors are without a positive return for the last three years. Some might well form the view that the CEO is 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).

If you want to buy a stock that is better than Ethan Allen Interiors, this free list of high return, low debt companies is a great place to look.

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.

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. Thank you for reading.