Leading The InterGroup Corporation (NASDAQ:INTG) as the CEO, John Winfield took the company to a valuation of US$53.49M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Winfield’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. Check out our latest analysis for InterGroup
What has INTG’s performance been like?
Profitability of a company is a strong indication of INTG’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Winfield’s performance. Recently, INTG delivered negative earnings of -US$2.74M . But this is an improvement on prior year’s loss of -US$3.83M, which may signal a turnaround since INTG has been loss-making for the past five years, on average, with an EPS of -US$0.64. As profits are moving up and up, CEO pay should echo Winfield’s hard work. During the same period, Winfield’s total remuneration fell by more than half of the prior year’s level, to US$935.00K.
Is INTG’s CEO overpaid relative to the market?
Despite the fact that one size does not fit all, since remuneration should be tailored to the specific company and market, we can gauge a high-level thresold to see if INTG is an outlier. This exercise can help direct shareholders to ask the right question about Winfield’s incentive alignment. Typically, a US small-cap has a value of $1B, creates earnings of $96M, and pays its CEO at roughly $2.7M per annum. Normally I would use earnings and market cap to account for variations in performance, however, INTG’s negative earnings lower the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Winfield is being paid within the bounds of reasonableness. On the whole, though INTG is loss-making, it seems like the CEO’s pay is fair.
You can breathe easy knowing that shareholder funds aren’t being used to overpay INTG’s CEO. However, on the flipside, you should ask whether Winfield is appropriately remunerated on the basis of retention. Its important for shareholders to be active in voting governance decisions, as board members are only representatives of investors’ voices. If you have not done so already, I urge you to complete your research by taking a look at the following:
1. Governance: To find out more about INTG’s governance, look through our infographic report of the company’s board and management.
2. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of INTG? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.