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This article will reflect on the compensation paid to Matthijs Glastra who has served as CEO of Novanta Inc. (NASDAQ:NOVT) since 2016. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Matthijs Glastra Compare With Other Companies In The Industry?
According to our data, Novanta Inc. has a market capitalization of US$4.2b, and paid its CEO total annual compensation worth US$4.1m over the year to December 2019. That is, the compensation was roughly the same as last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$640k.
On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$5.7m. So it looks like Novanta compensates Matthijs Glastra in line with the median for the industry. What's more, Matthijs Glastra holds US$12m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 34% of total compensation represents salary, while the remainder of 66% is other remuneration. It's interesting to note that Novanta allocates a smaller portion of compensation to salary 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.
A Look at Novanta Inc.'s Growth Numbers
Novanta Inc. has reduced its earnings per share by 5.1% a year over the last three years. It saw its revenue drop 3.2% over the last year.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Novanta Inc. Been A Good Investment?
Boasting a total shareholder return of 140% over three years, Novanta Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
As we touched on above, Novanta Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. But on the bright side, shareholder returns have moved northward during the same period. We do not think CEO compensation is a problem, but shrinking EPS is undoubtedly an issue that will have to be addressed.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Novanta that investors should think about before committing capital to this stock.
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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