Is Genesis Metals Corp’s (CVE:GIS) CEO Paid At A Competitive Rate?
Brian Groves is the CEO of Genesis Metals Corp (TSXV:GIS), which has recently grown to a market capitalization of CA$6.40M. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Groves’s pay and compare this to the company’s performance over the same period, as well as measure it against other Canadian CEOs leading companies of similar size and profitability. Check out our latest analysis for Genesis Metals
What has GIS’s performance been like?
Profitability of a company is a strong indication of GIS’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Groves’s performance. Most recently, GIS released negative earnings of -CA$4.54M , which is a further decline from prior year’s loss of -CA$2.30M. Moreover, on average, GIS has been loss-making in the past, with a 5-year average EPS of -CA$0.61. In the situation of negative earnings, the company may be facing a period of reinvestment and growth, or it can be a sign of some headwind. In any case, CEO compensation should be reflective of the current state of the business. In the most recent report, Groves’s total compensation more than doubled, reaching CA$166.00K , but off a low base. In addition to this, Groves’s pay is also made up of 20.24% non-cash elements, which means that fluxes in GIS’s share price can impact the true level of what the CEO actually collects at the end of the year.
Is GIS’s CEO overpaid relative to the market?
Though one size does not fit all, as remuneration should be tailored to the specific company and market, we can gauge a high-level thresold to see if GIS deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Groves’s incentive alignment. Generally, a Canadian small-cap has a value of $345M, produces earnings of $24M, and remunerates its CEO circa $770,000 per annum. Normally I’d use market cap and profit as factors determining performance, however, GIS’s negative earnings reduces the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Groves is paid aptly compared to those in similar-sized companies. Putting everything together, although GIS is loss-making, it seems like the CEO’s pay is sound.
Next Steps:
My conclusion is that Groves is not being overpaid. But your role as a shareholder should not end here. As above, this is a relatively simplistic calculation using high-level benchmarket. Proactive shareholders should question their representatives (i.e. the board of directors) how they think about the CEO’s incentive alignment with shareholders and how they balance this with retention and reward. If you have not done so already, I urge you to complete your research by taking a look at the following:
Governance: To find out more about GIS’s governance, look through our infographic report of the company’s board and management.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GIS? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass 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.
