How Should Investors Feel About Ultra Clean Holdings' (NASDAQ:UCTT) CEO Remuneration?
This article will reflect on the compensation paid to Jim Scholhamer who has served as CEO of Ultra Clean Holdings, Inc. (NASDAQ:UCTT) since 2015. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Ultra Clean Holdings.
Check out our latest analysis for Ultra Clean Holdings
How Does Total Compensation For Jim Scholhamer Compare With Other Companies In The Industry?
Our data indicates that Ultra Clean Holdings, Inc. has a market capitalization of US$1.2b, and total annual CEO compensation was reported as US$2.7m for the year to December 2019. That's a notable increase of 18% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$524k.
On comparing similar companies from the same industry with market caps ranging from US$1.0b to US$3.2b, we found that the median CEO total compensation was US$4.0m. Accordingly, Ultra Clean Holdings pays its CEO under the industry median. Moreover, Jim Scholhamer also holds US$9.5m worth of Ultra Clean Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2019 | 2018 | Proportion (2019) |
Salary | US$524k | US$495k | 19% |
Other | US$2.2m | US$1.8m | 81% |
Total Compensation | US$2.7m | US$2.3m | 100% |
Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. Ultra Clean Holdings is paying a higher share of its remuneration through a salary in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Ultra Clean Holdings, Inc.'s Growth Numbers
Over the last three years, Ultra Clean Holdings, Inc. has shrunk its earnings per share by 17% per year. Its revenue is up 27% over the last year.
The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Ultra Clean Holdings, Inc. Been A Good Investment?
We think that the total shareholder return of 43%, over three years, would leave most Ultra Clean Holdings, Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
To Conclude...
As previously discussed, Jim is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Meanwhile, shareholder returns and revenues are growing at a good clip. But it's noteworthy that EPS growth is in the red during the same time frame. However, considering all aspects of performance, we've concluded Jim earns an appropriate compensation.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 3 warning signs for Ultra Clean Holdings that you should be aware of before investing.
Switching gears from Ultra Clean Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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