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Shareholders will probably not be too impressed with the underwhelming results at Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 11 June 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. From our analysis, we think CEO compensation may need a review in light of the recent performance.
Comparing Tabula Rasa HealthCare, Inc.'s CEO Compensation With the industry
Our data indicates that Tabula Rasa HealthCare, Inc. has a market capitalization of US$1.1b, and total annual CEO compensation was reported as US$4.6m for the year to December 2020. We note that's a decrease of 10% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$497k.
On comparing similar companies from the same industry with market caps ranging from US$400m to US$1.6b, we found that the median CEO total compensation was US$2.6m. Accordingly, our analysis reveals that Tabula Rasa HealthCare, Inc. pays Calvin Knowlton north of the industry median. Furthermore, Calvin Knowlton directly owns US$37m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 14% of total compensation represents salary and 86% is other remuneration. Tabula Rasa HealthCare sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Tabula Rasa HealthCare, Inc.'s Growth Numbers
Over the last three years, Tabula Rasa HealthCare, Inc. has shrunk its earnings per share by 40% per year. Its revenue is up 1.5% over the last year.
Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Tabula Rasa HealthCare, Inc. Been A Good Investment?
With a three year total loss of 22% for the shareholders, Tabula Rasa HealthCare, Inc. would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.
Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.
CEO compensation can have a massive impact on performance, but it's just one element. We've identified 3 warning signs for Tabula Rasa HealthCare that investors should be aware of in a dynamic business environment.
Important note: Tabula Rasa HealthCare is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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