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How Should Investors React To Ultra Electronics Holdings' (LON:ULE) CEO Pay?

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Simon Pryce has been the CEO of Ultra Electronics Holdings plc (LON:ULE) since 2018, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Ultra Electronics Holdings.

Check out our latest analysis for Ultra Electronics Holdings

Comparing Ultra Electronics Holdings plc's CEO Compensation With the industry

At the time of writing, our data shows that Ultra Electronics Holdings plc has a market capitalization of UK£1.5b, and reported total annual CEO compensation of UK£1.6m for the year to December 2019. Notably, that's an increase of 50% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£665k.

On examining similar-sized companies in the industry with market capitalizations between UK£738m and UK£2.4b, we discovered that the median CEO total compensation of that group was UK£1.6m. From this we gather that Simon Pryce is paid around the median for CEOs in the industry. Furthermore, Simon Pryce directly owns UK£769k worth of shares in the company.

Component

2019

2018

Proportion (2019)

Salary

UK£665k

UK£358k

42%

Other

UK£927k

UK£702k

58%

Total Compensation

UK£1.6m

UK£1.1m

100%

Speaking on an industry level, nearly 42% of total compensation represents salary, while the remainder of 58% is other remuneration. There isn't a significant difference between Ultra Electronics Holdings and the broader market, in terms of salary allocation in the overall compensation package. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

ceo-compensation
ceo-compensation

Ultra Electronics Holdings plc's Growth

Ultra Electronics Holdings plc's earnings per share (EPS) grew 5.4% per year over the last three years. In the last year, its revenue is up 6.0%.

We're not particularly impressed by the revenue growth, but it is good to see modest EPS growth. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Ultra Electronics Holdings plc Been A Good Investment?

Most shareholders would probably be pleased with Ultra Electronics Holdings plc for providing a total return of 74% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

As we touched on above, Ultra Electronics Holdings plc is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. But the business isn't reporting great numbers in terms of EPS growth. On the other hand, shareholder returns over the same period have been very healthy. So while shareholders shouldn't be overly concerned about CEO compensation, we suspect most would prefer to see improved performance, before a bump in pay.

CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Ultra Electronics Holdings (free visualization of insider trades).

Important note: Ultra Electronics Holdings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.