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Dave Shemmans became the CEO of Ricardo plc (LON:RCDO) in 2005. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we’ll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Dave Shemmans’s Compensation Compare With Similar Sized Companies?
Our data indicates that Ricardo plc is worth UK£326m, and total annual CEO compensation is UK£1.4m. (This number is for the twelve months until 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at UK£490k. We examined companies with market caps from UK£157m to UK£626m, and discovered that the median CEO compensation of that group was UK£710k.
As you can see, Dave Shemmans is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Ricardo plc 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 Ricardo has changed from year to year.
Is Ricardo plc Growing?
Ricardo plc has increased its earnings per share (EPS) by an average of 1.5% a year, over the last three years (using a line of best fit). It achieved revenue growth of 7.9% over the last year.
I would argue that the improvement in revenue isn’t particularly impressive, but the modest improvement in EPS is good. So there are some positives here, but not enough to earn high praise. It could be important to check this free visual depiction of what analysts expect for the future.
Has Ricardo plc Been A Good Investment?
Given the total loss of 20% over three years, many shareholders in Ricardo plc are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.
We examined the amount Ricardo plc pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.
While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Considering this, we have the opinion that the CEO pay is more on the generous side, than the modest side. So you may want to check if insiders are buying Ricardo shares with their own money (free access).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.