How Should Investors React To Smith Micro Software, Inc.’s (NASDAQ:SMSI) CEO Pay?
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William Smith has been the CEO of Smith Micro Software, Inc. (NASDAQ:SMSI) since 1982. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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.
View our latest analysis for Smith Micro Software
How Does William Smith’s Compensation Compare With Similar Sized Companies?
According to our data, Smith Micro Software, Inc. has a market capitalization of US$56m, and pays its CEO total annual compensation worth US$640k. (This is based on the year to 2017). While we always look at total compensation first, we note that the salary component is less, at US$475k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO compensation to be US$300k.
Thus we can conclude that William Smith receives more in total compensation than the median of a group of companies in the same market, and of similar size to Smith Micro Software, Inc.. However, this doesn’t necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.
You can see, below, how CEO compensation at Smith Micro Software has changed over time.
Is Smith Micro Software, Inc. Growing?
Over the last three years, Smith Micro Software, Inc. has not seen its earnings per share change much, though they have deteriorated slightly, according to a line of best fit. In the last year, its revenue is up 1.4%.
Unfortunately there is a complete lack of earnings per share improvement, over three years. The modest increase in revenue in the last year isn’t enough to make me overlook the disappointing change in earnings per share. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. It could be important to check this free visual depiction of what analysts expect for the future.
Has Smith Micro Software, Inc. Been A Good Investment?
Since shareholders would have lost about 23% over three years, some Smith Micro Software, Inc. shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary…
We examined the amount Smith Micro Software, 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.
Earnings per share have not grown in three years, and the revenue growth fails to impress us.
Just as bad, share price gains for investors have failed to materialize, over the same period. This analysis suggests to us that the CEO is paid too generously! CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Smith Micro Software (free visualization of insider trades).
Important note: Smith Micro Software may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE 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 editorial-team@simplywallst.com.
