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How Should Investors React To HomeStreet, Inc.'s (NASDAQ:HMST) CEO Pay?

Simply Wall St

In 2010 Mark Mason was appointed CEO of HomeStreet, Inc. (NASDAQ:HMST). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for HomeStreet

How Does Mark Mason's Compensation Compare With Similar Sized Companies?

According to our data, HomeStreet, Inc. has a market capitalization of US$688m, and paid its CEO total annual compensation worth US$1.7m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$700k. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.7m.

Most shareholders would consider it a positive that Mark Mason takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.

The graphic below shows how CEO compensation at HomeStreet has changed from year to year.

NasdaqGS:HMST CEO Compensation, September 26th 2019

Is HomeStreet, Inc. Growing?

On average over the last three years, HomeStreet, Inc. has shrunk earnings per share by 12% each year (measured with a line of best fit). Its revenue is up 24% over last year.

Unfortunately, earnings per share have trended lower over the last three years. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. You might want to check this free visual report on analyst forecasts for future earnings.

Has HomeStreet, Inc. Been A Good Investment?

HomeStreet, Inc. has generated a total shareholder return of 13% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

It looks like HomeStreet, Inc. pays its CEO less than similar sized companies.

Shareholders should note that compensation for Mark Mason is under the median of a group of similar sized companies. But the business isn't growing earnings per share, and the returns to shareholders haven't been wonderful. We would like to see EPS growth from the business, although we wouldn't say the CEO pay is high. So you may want to check if insiders are buying HomeStreet shares with their own money (free access).

If you want to buy a stock that is better than HomeStreet, this free list of high return, low debt companies is a great place to look.

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.