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Is Infinera Corporation's (NASDAQ:INFN) CEO Pay Justified?

Simply Wall St

Tom Fallon has been the CEO of Infinera Corporation (NASDAQ:INFN) since 2010. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Infinera

How Does Tom Fallon's Compensation Compare With Similar Sized Companies?

According to our data, Infinera Corporation has a market capitalization of US$980m, and paid its CEO total annual compensation worth US$4.9m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$520k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.7m.

Thus we can conclude that Tom Fallon receives more in total compensation than the median of a group of companies in the same market, and of similar size to Infinera Corporation. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at Infinera has changed over time.

NasdaqGS:INFN CEO Compensation, October 16th 2019

Is Infinera Corporation Growing?

Over the last three years Infinera Corporation has shrunk its earnings per share by an average of 71% per year (measured with a line of best fit). It achieved revenue growth of 40% over the last year.

The reduction in earnings per share, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. It could be important to check this free visual depiction of what analysts expect for the future.

Has Infinera Corporation Been A Good Investment?

Since shareholders would have lost about 39% over three years, some Infinera Corporation shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by Infinera Corporation, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Over the last three years, shareholder returns have been downright disappointing, and the underlying business has failed to impress us. Considering this, we have the opinion that the CEO pay is more on the generous side, than the modest side. Shareholders may want to check for free if Infinera insiders are buying or selling shares.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

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.

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. Thank you for reading.