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In 2015 John Arabia was appointed CEO of Sunstone Hotel Investors, Inc. (NYSE:SHO). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. 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 John Arabia's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Sunstone Hotel Investors, Inc. has a market cap of US$3.1b, and is paying total annual CEO compensation of US$5.1m. (This is based on the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$768k. We looked at a group of companies with market capitalizations from US$2.0b to US$6.4b, and the median CEO total compensation was US$5.1m.
So John Arabia receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.
You can see a visual representation of the CEO compensation at Sunstone Hotel Investors, below.
Is Sunstone Hotel Investors, Inc. Growing?
Over the last three years Sunstone Hotel Investors, Inc. has shrunk its earnings per share by an average of 14% per year (measured with a line of best fit). Its revenue is down -4.8% over last year.
Unfortunately, earnings per share have trended lower over the last three years. This is compounded by the fact revenue is actually down on last year. 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 Sunstone Hotel Investors, Inc. Been A Good Investment?
Sunstone Hotel Investors, Inc. has generated a total shareholder return of 28% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
John Arabia is paid around what is normal the leaders of comparable size companies.
We feel that earnings per share have been a bit disappointing, but and we don't think the total returns are amazing. We wouldn't say the CEO pay is too high, but it's probably fair to say that many shareholders would like to see improved performance, before any pay rise occurs. Whatever your view on compensation, you might want to check if insiders are buying or selling Sunstone Hotel Investors shares (free trial).
Important note: Sunstone Hotel Investors 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.
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 firstname.lastname@example.org. 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.