This article will reflect on the compensation paid to Jeff Mezger who has served as CEO of KB Home (NYSE:KBH) since 2006. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for KB Home.
How Does Total Compensation For Jeff Mezger Compare With Other Companies In The Industry?
Our data indicates that KB Home has a market capitalization of US$3.1b, and total annual CEO compensation was reported as US$13m for the year to November 2019. We note that's an increase of 12% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.2m.
For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$9.2m. Hence, we can conclude that Jeff Mezger is remunerated higher than the industry median. Furthermore, Jeff Mezger directly owns US$34m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 27% of total compensation represents salary, while the remainder of 73% is other remuneration. KB Home sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at KB Home's Growth Numbers
KB Home's earnings per share (EPS) grew 33% per year over the last three years. In the last year, its revenue is up 6.9%.
Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has KB Home Been A Good Investment?
Boasting a total shareholder return of 54% over three years, KB Home has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
As previously discussed, Jeff is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. However, KB Home has produced strong earnings growth and shareholder returns over the last three years. Considering such exceptional results for the company, we'd venture to say CEO compensation is fair. The pleasing shareholder returns are the cherry on top. We wouldn't be wrong in saying that shareholders feel that Jeff's performance creates value for the company.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 4 warning signs for KB Home that investors should look into moving forward.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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