Wayne Smith became the CEO of Community Health Systems, Inc. (NYSE:CYH) in 1997. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Wayne Smith's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Community Health Systems, Inc. has a market cap of US$297m, and reported total annual CEO compensation of US$7.0m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.6m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a selection of companies with market caps ranging from US$100m to US$400m, we found the median CEO total compensation was US$1.1m.
As you can see, Wayne Smith is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Community Health Systems, Inc. is paying too much. 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 Community Health Systems has changed from year to year.
Is Community Health Systems, Inc. Growing?
Community Health Systems, Inc. has increased its earnings per share (EPS) by an average of 15% a year, over the last three years (using a line of best fit). In the last year, its revenue is down 2.8%.
This demonstrates that the company has been improving recently. A good result. While it would be good to see revenue growth, profits matter more in the end. It could be important to check this free visual depiction of what analysts expect for the future.
Has Community Health Systems, Inc. Been A Good Investment?
With a three year total loss of 60%, Community Health Systems, Inc. would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.
We compared total CEO remuneration at Community Health Systems, Inc. with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Whatever your view on compensation, you might want to check if insiders are buying or selling Community Health Systems shares (free trial).
Important note: Community Health Systems 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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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