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Jensen Huang became the CEO of NVIDIA Corporation (NASDAQ:NVDA) in 1993, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing NVIDIA Corporation's CEO Compensation With the industry
At the time of writing, our data shows that NVIDIA Corporation has a market capitalization of US$258b, and reported total annual CEO compensation of US$11m for the year to January 2020. Notably, that's a decrease of 16% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$997k.
In comparison with other companies in the industry with market capitalizations over US$8.0b , the reported median total CEO compensation was US$13m. This suggests that NVIDIA remunerates its CEO largely in line with the industry average. What's more, Jensen Huang holds US$9.0b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 14% of total compensation represents salary and 86% is other remuneration. In NVIDIA's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
NVIDIA Corporation's Growth
NVIDIA Corporation's earnings per share (EPS) grew 15% per year over the last three years. It achieved revenue growth of 9.7% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see revenue heading northwards, as this is consistent with healthy business conditions. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has NVIDIA Corporation Been A Good Investment?
We think that the total shareholder return of 158%, over three years, would leave most NVIDIA Corporation shareholders smiling. 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 we noted earlier, NVIDIA pays its CEO in line with similar-sized companies belonging to the same industry. Few would be critical of the leadership, since returns have been juicy and earnings are moving in the right direction. Indeed, many might consider that Jensen is compensated rather modestly, given the solid company performance! Stockholders might even be okay with a bump in pay, seeing as how investor returns have been so strong.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 3 warning signs for NVIDIA that you should be aware of before investing.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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