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How Should Investors Feel About Broken Hill Prospecting Limited's (ASX:BPL) CEO Pay?

Simply Wall St

Trangie Johnston has been the CEO of Broken Hill Prospecting Limited (ASX:BPL) since 2016. First, this article will compare CEO compensation with compensation at similar sized 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. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Broken Hill Prospecting

How Does Trangie Johnston's Compensation Compare With Similar Sized Companies?

According to our data, Broken Hill Prospecting Limited has a market capitalization of AU$3.7m, and pays its CEO total annual compensation worth AU$509k. (This figure is for the year to June 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$343k. We examined a group of similar sized companies, with market capitalizations of below AU$290m. The median CEO total compensation in that group is AU$368k.

It would therefore appear that Broken Hill Prospecting Limited pays Trangie Johnston more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at Broken Hill Prospecting has changed from year to year.

ASX:BPL CEO Compensation, September 16th 2019

Is Broken Hill Prospecting Limited Growing?

On average over the last three years, Broken Hill Prospecting Limited has shrunk earnings per share by 22% each year (measured with a line of best fit). It saw its revenue drop -90% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Broken Hill Prospecting Limited Been A Good Investment?

Since shareholders would have lost about 67% over three years, some Broken Hill Prospecting Limited shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We examined the amount Broken Hill Prospecting Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

Arguably worse, investors are without a positive return for the last three years. This analysis suggests to us that the CEO is paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling Broken Hill Prospecting shares (free trial).

Important note: Broken Hill Prospecting 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.

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.