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Is Innospec Inc.'s (NASDAQ:IOSP) CEO Being Overpaid?

Simply Wall St

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In 2009 Patrick Williams was appointed CEO of Innospec Inc. (NASDAQ:IOSP). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Innospec

How Does Patrick Williams's Compensation Compare With Similar Sized Companies?

Our data indicates that Innospec Inc. is worth US$2.1b, and total annual CEO compensation is US$5.4m. (This is based on the year to December 2018). That's actually a decrease on the year before. We think total compensation is more important but we note that the CEO salary is lower, at US$1.1m. We looked at a group of companies with market capitalizations from US$1.0b to US$3.2b, and the median CEO total compensation was US$3.7m.

Thus we can conclude that Patrick Williams receives more in total compensation than the median of a group of companies in the same market, and of similar size to Innospec Inc.. 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 Innospec has changed over time.

NasdaqGS:IOSP CEO Compensation, May 2nd 2019
NasdaqGS:IOSP CEO Compensation, May 2nd 2019

Is Innospec Inc. Growing?

Over the last three years Innospec Inc. has shrunk its earnings per share by an average of 22% per year (measured with a line of best fit). In the last year, its revenue is up 13%.

Sadly for shareholders, earnings per share are actually down, over three years. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.

Has Innospec Inc. Been A Good Investment?

I think that the total shareholder return of 81%, over three years, would leave most Innospec Inc. shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We examined the amount Innospec Inc. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

On the other hand, returns have been good, so the company is doing something right. So on this analysis we'd stop short of criticizing the level of CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Innospec shares (free trial).

If you want to buy a stock that is better than Innospec, this free list of high return, low debt companies is a great place to look.

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.