D. Patterson has been the CEO of FirstService Corporation (TSE:FSV) since 2015. 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. 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 D. Patterson's Compensation Compare With Similar Sized Companies?
Our data indicates that FirstService Corporation is worth CA$5.3b, and total annual CEO compensation was reported as US$4.0m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$608k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO total compensation was US$2.9m.
Thus we can conclude that D. Patterson receives more in total compensation than the median of a group of companies in the same market, and of similar size to FirstService Corporation. However, this doesn't necessarily mean the pay 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 FirstService has changed from year to year.
Is FirstService Corporation Growing?
Over the last three years FirstService Corporation has shrunk its earnings per share by an average of 94% per year (measured with a line of best fit). Its revenue is up 25% over last year.
Unfortunately, earnings per share have trended lower over the last 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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has FirstService Corporation Been A Good Investment?
I think that the total shareholder return of 71%, over three years, would leave most FirstService Corporation shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by FirstService Corporation, and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.
Earnings per share have not grown in three years, and the revenue growth fails to impress us. But clearly there are some positives, because investors have done well over the same time frame. Given this situation we doubt shareholders are particularly concerned about the CEO compensation. On another note, we've spotted 1 warning sign for FirstService that investors should look into moving forward.
If you want to buy a stock that is better than FirstService, this free list of high return, low debt companies is a great place to look.
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