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Lew Cirne became the CEO of New Relic, Inc. (NYSE:NEWR) in 2008, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether New Relic pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing New Relic, Inc.'s CEO Compensation With the industry
According to our data, New Relic, Inc. has a market capitalization of US$4.3b, and paid its CEO total annual compensation worth US$5.1m over the year to March 2020. We note that's an increase of 19% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$450k.
For comparison, other companies in the same industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$6.0m. So it looks like New Relic compensates Lew Cirne in line with the median for the industry. Moreover, Lew Cirne also holds US$461m worth of New Relic stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the industry, salary represented approximately 13% of total compensation out of all the companies we analyzed, while other remuneration made up 87% of the pie. New Relic pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
New Relic, Inc.'s Growth
Over the last three years, New Relic, Inc. has shrunk its earnings per share by 5.2% per year. Its revenue is up 25% over the last year.
The reduction in earnings, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has New Relic, Inc. Been A Good Investment?
Most shareholders would probably be pleased with New Relic, Inc. for providing a total return of 64% over three years. 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.
As previously discussed, Lew is compensated close to the median for companies of its size, and which belong to the same industry. Investors will be happy that New Relic has produced strong shareholder returns for the past three years. At the same time, revenues are also moving northwards at a healthy pace. On a worrying note, its important to acknowledge that EPS growth has been negative recently. Overall, the company's performance hasn't been that disappointing for us to object the CEO compensation.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for New Relic (1 doesn't sit too well with us!) that you should be aware of before investing here.
Switching gears from New Relic, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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.
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