Aaron Begley became the CEO of Matrix Composites & Engineering Ltd (ASX:MCE) in 2009, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Matrix Composites & Engineering pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Matrix Composites & Engineering Ltd's CEO Compensation With the industry
At the time of writing, our data shows that Matrix Composites & Engineering Ltd has a market capitalization of AU$16m, and reported total annual CEO compensation of AU$669k for the year to June 2020. This means that the compensation hasn't changed much from last year. Notably, the salary which is AU$434.8k, represents most of the total compensation being paid.
For comparison, other companies in the industry with market capitalizations below AU$283m, reported a median total CEO compensation of AU$837k. From this we gather that Aaron Begley is paid around the median for CEOs in the industry. What's more, Aaron Begley holds AU$1.6m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 66% of total compensation represents salary, while the remainder of 34% is other remuneration. Although there is a difference in how total compensation is set, Matrix Composites & Engineering more or less reflects the market in terms of setting the salary. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
A Look at Matrix Composites & Engineering Ltd's Growth Numbers
Over the last three years, Matrix Composites & Engineering Ltd has shrunk its earnings per share by 33% per year. It saw its revenue drop 28% over the last year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Matrix Composites & Engineering Ltd Been A Good Investment?
Given the total shareholder loss of 69% over three years, many shareholders in Matrix Composites & Engineering Ltd are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
As previously discussed, Aaron is compensated close to the median for companies of its size, and which belong to the same industry. On the other hand, EPS growth and total shareholder return have been negative for the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.
CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 2 warning signs for Matrix Composites & Engineering you should be aware of, and 1 of them is concerning.
Important note: Matrix Composites & Engineering is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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