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Despite strong share price growth of 64% for Medallion Financial Corp. (NASDAQ:MFIN) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 17 June 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
Comparing Medallion Financial Corp.'s CEO Compensation With the industry
At the time of writing, our data shows that Medallion Financial Corp. has a market capitalization of US$225m, and reported total annual CEO compensation of US$1.5m for the year to December 2020. That's mostly flat as compared to the prior year's compensation. In particular, the salary of US$890.7k, makes up a huge portion of the total compensation being paid to the CEO.
On comparing similar companies from the same industry with market caps ranging from US$100m to US$400m, we found that the median CEO total compensation was US$595k. Accordingly, our analysis reveals that Medallion Financial Corp. pays Alvin Murstein north of the industry median. Furthermore, Alvin Murstein directly owns US$15m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. Medallion Financial is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at Medallion Financial Corp.'s Growth Numbers
Over the last three years, Medallion Financial Corp. has shrunk its earnings per share by 5.5% per year. Its revenue is up 10% over the last year.
Overall this is not a very positive result for shareholders. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Medallion Financial Corp. Been A Good Investment?
Most shareholders would probably be pleased with Medallion Financial Corp. for providing a total return of 64% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 2 warning signs for Medallion Financial you should be aware of, and 1 of them doesn't sit too well with us.
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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