Rakesh Gupta has been the CEO of Legacy Iron Ore Limited (ASX:LCY) since 2015. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Rakesh Gupta's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Legacy Iron Ore Limited has a market cap of AU$4.4m, and reported total annual CEO compensation of AU$227k for the year to March 2019. We think total compensation is more important but we note that the CEO salary is lower, at AU$200k. We took a group of companies with market capitalizations below AU$295m, and calculated the median CEO total compensation to be AU$375k.
Most shareholders would consider it a positive that Rakesh Gupta takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. While this is a good thing, you'll need to understand the business better before you can form an opinion.
You can see, below, how CEO compensation at Legacy Iron Ore has changed over time.
Is Legacy Iron Ore Limited Growing?
Legacy Iron Ore Limited has increased its earnings per share (EPS) by an average of 18% a year, over the last three years (using a line of best fit). Its revenue is down 57% over last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. While it would be good to see revenue growth, profits matter more in the end. Although we don't have analyst forecasts shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Legacy Iron Ore Limited Been A Good Investment?
Since shareholders would have lost about 50% over three years, some Legacy Iron Ore Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.
Legacy Iron Ore Limited is currently paying its CEO below what is normal for companies of its size.
Many would consider this to indicate that the pay is modest since the business is growing. Few would deny that the total shareholder return over the last three years could have been a lot better. We're not critical of the remuneration Rakesh Gupta receives, but it would be good to see improved returns to shareholders before the remuneration grows too much. This sort of circumstance certainly justifies further research, because the investment returns might still come in the future. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Legacy Iron Ore (free visualization of insider trades).
If you want to buy a stock that is better than Legacy Iron Ore, this free list of high return, low debt companies is a great place to look.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.