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How Should Investors React To Recro Pharma, Inc.'s (NASDAQ:REPH) CEO Pay?

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In 2008 Gerri Henwood was appointed CEO of Recro Pharma, Inc. (NASDAQ:REPH). First, this article will compare CEO compensation with compensation at similar sized companies. 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 method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Recro Pharma

How Does Gerri Henwood's Compensation Compare With Similar Sized Companies?

Our data indicates that Recro Pharma, Inc. is worth US$382m, and total annual CEO compensation was reported as US$2.4m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$599k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from US$200m to US$800m, and the median CEO total compensation was US$1.7m.

It would therefore appear that Recro Pharma, Inc. pays Gerri Henwood more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see a visual representation of the CEO compensation at Recro Pharma, below.

NasdaqCM:REPH CEO Compensation, February 21st 2020
NasdaqCM:REPH CEO Compensation, February 21st 2020

Is Recro Pharma, Inc. Growing?

Recro Pharma, Inc. has reduced its earnings per share by an average of 16% a year, over the last three years (measured with a line of best fit). Its revenue is up 26% over last year.

Investors should note that, over three years, earnings per share are down. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. These two metric are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has Recro Pharma, Inc. Been A Good Investment?

Boasting a total shareholder return of 156% over three years, Recro Pharma, Inc. has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

We examined the amount Recro Pharma, Inc. 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 generally prefer to see stronger EPS growth, there's no arguing with the strong returns to shareholders, over the last three years. So, considering these tasty returns, the CEO compensation may be quite appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Recro Pharma shares (free trial).

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

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.

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. Thank you for reading.