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How Should Investors Feel About Lipocine Inc.'s (NASDAQ:LPCN) CEO Pay?

Simply Wall St

Mahesh Patel has been the CEO of Lipocine Inc. (NASDAQ:LPCN) since 1997. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Lipocine

How Does Mahesh Patel's Compensation Compare With Similar Sized Companies?

Our data indicates that Lipocine Inc. is worth US$70m, and total annual CEO compensation is US$1.2m. (This is based on the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$439k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO total compensation to be US$496k.

It would therefore appear that Lipocine Inc. pays Mahesh Patel 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 Lipocine has changed from year to year.

NasdaqCM:LPCN CEO Compensation, September 18th 2019

Is Lipocine Inc. Growing?

Over the last three years Lipocine Inc. has grown its earnings per share (EPS) by an average of 27% per year (using a line of best fit). It has seen most of its revenue evaporate over the past year.

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. Shareholders might be interested in this free visualization of analyst forecasts.

Has Lipocine Inc. Been A Good Investment?

With a three year total loss of 22%, Lipocine Inc. would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We examined the amount Lipocine Inc. pays its CEO, and compared it to the amount paid by similar sized companies. 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. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. Whatever your view on compensation, you might want to check if insiders are buying or selling Lipocine shares (free trial).

Important note: Lipocine 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.