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Adrian Floate became the CEO of Cirralto Limited (ASX:CRO) in 2018, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Cirralto Limited's CEO Compensation With the industry
At the time of writing, our data shows that Cirralto Limited has a market capitalization of AU$189m, and reported total annual CEO compensation of AU$416k for the year to June 2020. We note that's a decrease of 30% compared to last year. Notably, the salary which is AU$275.0k, represents most of the total compensation being paid.
On comparing similar-sized companies in the industry with market capitalizations below AU$259m, we found that the median total CEO compensation was AU$416k. From this we gather that Adrian Floate is paid around the median for CEOs in the industry. Furthermore, Adrian Floate directly owns AU$5.7m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 55% of total compensation represents salary, while the remainder of 45% is other remuneration. Cirralto is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
Cirralto Limited's Growth
Over the past three years, Cirralto Limited has seen its earnings per share (EPS) grow by 44% per year. It achieved revenue growth of 1.9% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Cirralto Limited Been A Good Investment?
Boasting a total shareholder return of 38% over three years, Cirralto Limited has done well by shareholders. 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.
As we touched on above, Cirralto Limited 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. Few would be critical of the leadership, since returns have been juicy and EPS are moving in the right direction. Indeed, many might consider that Adrian is compensated rather modestly, given the solid company performance! Also, such solid returns might lead to shareholders warming to the idea of a bump in pay.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 5 warning signs for Cirralto (3 are a bit unpleasant!) that you should be aware of before investing here.
Important note: Cirralto 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.
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