In 2016 Tim NeCastro was appointed CEO of Erie Indemnity Company (NASDAQ:ERIE). 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. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Tim NeCastro's Compensation Compare With Similar Sized Companies?
According to our data, Erie Indemnity Company has a market capitalization of US$8.1b, and pays its CEO total annual compensation worth US$3.5m. (This number is for the twelve months until December 2018). That's actually a decrease on the year before. While we always look at total compensation first, we note that the salary component is less, at US$807k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$4.0b to US$12b. The median total CEO compensation was US$6.7m.
A first glance this seems like a real positive for shareholders, since Tim NeCastro is paid less than the average total compensation paid by similar sized companies. 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 Erie Indemnity has changed over time.
Is Erie Indemnity Company Growing?
Erie Indemnity Company has increased its earnings per share (EPS) by an average of 13% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 41%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. Shareholders might be interested in this free visualization of analyst forecasts.
Has Erie Indemnity Company Been A Good Investment?
I think that the total shareholder return of 108%, over three years, would leave most Erie Indemnity Company 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.
Erie Indemnity Company is currently paying its CEO below what is normal for companies of its size. Considering the underlying business is growing earnings, this would suggest the pay is modest. The pleasing shareholder returns are the cherry on top; you might even consider that Tim NeCastro deserves a raise!
It is relatively rare to see a modestly paid CEO when performance is so impressive. It would be even more positive if company insiders are buying shares. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Erie Indemnity.
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.
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