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How Should Investors React To Valhi, Inc.'s (NYSE:VHI) CEO Pay?

Simply Wall St

Robert Graham became the CEO of Valhi, Inc. (NYSE:VHI) in 2017. First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Valhi

How Does Robert Graham's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Valhi, Inc. has a market cap of US$599m, and reported total annual CEO compensation of US$5.8m for the year to December 2018. Notably, the salary of US$5.8m is the vast majority of the CEO compensation. We examined companies with market caps from US$200m to US$800m, and discovered that the median CEO total compensation of that group was US$1.7m.

It would therefore appear that Valhi, Inc. pays Robert Graham 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, below, how CEO compensation at Valhi has changed over time.

NYSE:VHI CEO Compensation, January 21st 2020

Is Valhi, Inc. Growing?

Valhi, Inc. has increased its earnings per share (EPS) by an average of 31% a year, over the last three years (using a line of best fit). In the last year, its revenue is down 2.9%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. Revenue growth is a real positive for growth, but ultimately profits are more important. Although we don't have analyst forecasts shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Valhi, Inc. Been A Good Investment?

With a three year total loss of 41%, Valhi, Inc. would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared the total CEO remuneration paid by Valhi, Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

However, the earnings per share growth over three years is certainly impressive. On the other hand returns to investors over the same period have probably disappointed many. Considering the per share profit growth, but keeping in mind the weak returns, we'd need more time to form a view on CEO compensation. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Valhi.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

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.