Here's What We Think About Peet's (ASX:PPC) CEO Pay
This article will reflect on the compensation paid to Brendan Gore who has served as CEO of Peet Limited (ASX:PPC) since 2007. This analysis will also assess whether Peet pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for Peet
How Does Total Compensation For Brendan Gore Compare With Other Companies In The Industry?
Our data indicates that Peet Limited has a market capitalization of AU$616m, and total annual CEO compensation was reported as AU$1.4m for the year to June 2020. We note that's a decrease of 25% compared to last year. Notably, the salary which is AU$885.1k, represents most of the total compensation being paid.
On examining similar-sized companies in the industry with market capitalizations between AU$260m and AU$1.0b, we discovered that the median CEO total compensation of that group was AU$777k. Hence, we can conclude that Brendan Gore is remunerated higher than the industry median. Moreover, Brendan Gore also holds AU$6.8m worth of Peet stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | AU$885k | AU$917k | 62% |
Other | AU$550k | AU$1.0m | 38% |
Total Compensation | AU$1.4m | AU$1.9m | 100% |
Talking in terms of the industry, salary represented approximately 81% of total compensation out of all the companies we analyzed, while other remuneration made up 19% of the pie. Peet pays a modest slice of remuneration through salary, as compared to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Peet Limited's Growth
Over the last three years, Peet Limited has shrunk its earnings per share by 42% per year. It saw its revenue drop 25% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Peet Limited Been A Good Investment?
With a total shareholder return of 2.4% over three years, Peet Limited has done okay by shareholders. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
In Summary...
As we touched on above, Peet Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look great when you realize that the company has been suffering from negative EPS growth for the last three years. While shareholder returns are acceptable, they don't delight. So you can understand why we do not think CEO compensation is particularly modest!
CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Peet (2 shouldn't be ignored!) that you should be aware of before investing here.
Switching gears from Peet, 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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