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What Can We Learn About Lithia Motors' (NYSE:LAD) CEO Compensation?

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Simply Wall St
·4 min read
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This article will reflect on the compensation paid to Bryan DeBoer who has served as CEO of Lithia Motors, Inc. (NYSE:LAD) since 2012. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Lithia Motors

Comparing Lithia Motors, Inc.'s CEO Compensation With the industry

According to our data, Lithia Motors, Inc. has a market capitalization of US$6.9b, and paid its CEO total annual compensation worth US$7.3m over the year to December 2019. That's a notable increase of 34% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.1m.

On examining similar-sized companies in the industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$6.9m. From this we gather that Bryan DeBoer is paid around the median for CEOs in the industry. Furthermore, Bryan DeBoer directly owns US$53m worth of shares in the company, implying that they are deeply invested in the company's success.

Component

2019

2018

Proportion (2019)

Salary

US$1.1m

US$1.0m

15%

Other

US$6.2m

US$4.4m

85%

Total Compensation

US$7.3m

US$5.5m

100%

On an industry level, around 19% of total compensation represents salary and 81% is other remuneration. Lithia Motors sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
ceo-compensation

A Look at Lithia Motors, Inc.'s Growth Numbers

Lithia Motors, Inc. has seen its earnings per share (EPS) increase by 23% a year over the past three years. The trailing twelve months of revenue was pretty much the same as the prior period.

Shareholders would be glad to know that the company has improved itself over the last few years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Lithia Motors, Inc. Been A Good Investment?

Most shareholders would probably be pleased with Lithia Motors, Inc. for providing a total return of 137% 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.

To Conclude...

As we touched on above, Lithia Motors, Inc. 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. Investors would surely be happy to see that returns have been great, and that EPS is up. Although the pay is close to the industry median, overall performance is excellent, so we don't think the CEO is paid too generously. Also, such solid returns might lead to shareholders warming to the idea of a bump in pay.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for Lithia Motors that investors should be aware of in a dynamic business environment.

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.

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@simplywallst.com.