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Is Kratos Defense & Security Solutions, Inc.'s (NASDAQ:KTOS) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2004 Eric DeMarco was appointed CEO of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Kratos Defense & Security Solutions

How Does Eric DeMarco's Compensation Compare With Similar Sized Companies?

According to our data, Kratos Defense & Security Solutions, Inc. has a market capitalization of US$2.0b, and paid its CEO total annual compensation worth US$5.5m over the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$760k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We examined companies with market caps from US$1.0b to US$3.2b, and discovered that the median CEO total compensation of that group was US$4.1m.

As you can see, Eric DeMarco is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Kratos Defense & Security Solutions, Inc. is paying too much. 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 a visual representation of the CEO compensation at Kratos Defense & Security Solutions, below.

NasdaqGS:KTOS CEO Compensation, October 14th 2019

Is Kratos Defense & Security Solutions, Inc. Growing?

Kratos Defense & Security Solutions, Inc. has increased its earnings per share (EPS) by an average of 76% a year, over the last three years (using a line of best fit). It achieved revenue growth of 8.8% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. You might want to check this free visual report on analyst forecasts for future earnings.

Has Kratos Defense & Security Solutions, Inc. Been A Good Investment?

Most shareholders would probably be pleased with Kratos Defense & Security Solutions, Inc. for providing a total return of 192% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

We compared total CEO remuneration at Kratos Defense & Security Solutions, Inc. with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

However, the earnings per share growth over three years is certainly impressive. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Kratos Defense & Security Solutions (free visualization of insider trades).

Important note: Kratos Defense & Security Solutions 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 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. Thank you for reading.