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Is Huntington Ingalls Industries, Inc. (NYSE:HII) Overpaying Its CEO?

Simply Wall St

In 2011 Mike Petters was appointed CEO of Huntington Ingalls Industries, Inc. (NYSE:HII). First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Huntington Ingalls Industries

How Does Mike Petters's Compensation Compare With Similar Sized Companies?

Our data indicates that Huntington Ingalls Industries, Inc. is worth US$10b, and total annual CEO compensation was reported as US$5.6m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.0. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

This would give shareholders a good impression of the company, since most large companies pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.

You can see, below, how CEO compensation at Huntington Ingalls Industries has changed over time.

NYSE:HII CEO Compensation, December 12th 2019

Is Huntington Ingalls Industries, Inc. Growing?

Huntington Ingalls Industries, Inc. has increased its earnings per share (EPS) by an average of 17% a year, over the last three years (using a line of best fit). It achieved revenue growth of 8.9% 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 a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.

Has Huntington Ingalls Industries, Inc. Been A Good Investment?

Boasting a total shareholder return of 47% over three years, Huntington Ingalls Industries, 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.

In Summary...

Huntington Ingalls Industries, Inc. is currently paying its CEO below what is normal for large companies.

Since the business is growing, many would argue this suggests the pay is modest. And given most shareholders are probably very happy with recent returns, you might even think that Mike Petters deserves a raise! It is relatively rare to see a modestly paid CEO when performance is so impressive. It would be even more positive if company insiders are buying shares. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Huntington Ingalls Industries (free visualization of insider trades).

Important note: Huntington Ingalls Industries may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.