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Is Gem Diamonds Limited's (LON:GEMD) CEO Salary Justified?

Simply Wall St

The CEO of Gem Diamonds Limited (LON:GEMD) is Clifford Elphick. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Gem Diamonds

How Does Clifford Elphick's Compensation Compare With Similar Sized Companies?

Our data indicates that Gem Diamonds Limited is worth UK£97m, and total annual CEO compensation was reported as US$1.0m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$468k. We examined a group of similar sized companies, with market capitalizations of below UK£155m. The median CEO total compensation in that group is UK£249k.

Thus we can conclude that Clifford Elphick receives more in total compensation than the median of a group of companies in the same market, and of similar size to Gem Diamonds Limited. 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, below, how CEO compensation at Gem Diamonds has changed over time.

LSE:GEMD CEO Compensation, October 18th 2019

Is Gem Diamonds Limited Growing?

Gem Diamonds Limited has increased its earnings per share (EPS) by an average of 83% a year, over the last three years (using a line of best fit). Its revenue is down 34% over last year.

This demonstrates that the company has been improving recently. A good result. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. You might want to check this free visual report on analyst forecasts for future earnings.

Has Gem Diamonds Limited Been A Good Investment?

Given the total loss of 40% over three years, many shareholders in Gem Diamonds Limited are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared total CEO remuneration at Gem Diamonds Limited with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Gem Diamonds shares (free trial).

If you want to buy a stock that is better than Gem Diamonds, 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.