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Lyndon Davies became the CEO of Hornby PLC (LON:HRN) in 2017, 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 assess whether Hornby pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Hornby PLC's CEO Compensation With the industry
Our data indicates that Hornby PLC has a market capitalization of UK£115m, and total annual CEO compensation was reported as UK£222k for the year to March 2020. This means that the compensation hasn't changed much from last year. Notably, the salary of UK£222k is the entirety of the CEO compensation.
For comparison, other companies in the same industry with market capitalizations ranging between UK£73m and UK£294m had a median total CEO compensation of UK£195k. This suggests that Hornby remunerates its CEO largely in line with the industry average. What's more, Lyndon Davies holds UK£549k worth of shares in the company in their own name.
Talking in terms of the industry, salary represented approximately 83% of total compensation out of all the companies we analyzed, while other remuneration made up 17% of the pie. On a company level, Hornby prefers to reward its CEO through a salary, opting not to pay Lyndon Davies through non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Hornby PLC's Growth
Hornby PLC's earnings per share (EPS) grew 68% per year over the last three years. In the last year, its revenue is up 24%.
This demonstrates that the company has been improving recently and is good news for the shareholders. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Hornby PLC Been A Good Investment?
We think that the total shareholder return of 185%, over three years, would leave most Hornby PLC shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
Hornby rewards its CEO solely through a salary, ignoring non-salary benefits completely. As previously discussed, Lyndon is compensated close to the median for companies of its size, and which belong to the same industry. The company is growing EPS and total shareholder returns have been pleasing. Although the pay is close to the industry median, overall performance is excellent, so we don't think the CEO is paid too generously. In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for Hornby that investors should be aware of in a dynamic business environment.
Switching gears from Hornby, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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