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Herschel Segal became the CEO of DAVIDsTEA Inc. (NASDAQ:DTEA) 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 assess whether DAVIDsTEA pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Herschel Segal Compare With Other Companies In The Industry?
Our data indicates that DAVIDsTEA Inc. has a market capitalization of US$46m, and total annual CEO compensation was reported as CA$810k for the year to February 2020. That's a notable increase of 36% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at CA$400k.
On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was CA$1.6m. That is to say, Herschel Segal is paid under the industry median. Furthermore, Herschel Segal directly owns US$21m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 20% of total compensation represents salary and 80% is other remuneration. DAVIDsTEA pays out 49% of remuneration in the form of a salary, significantly higher than the industry average. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
DAVIDsTEA Inc.'s Growth
DAVIDsTEA Inc. has reduced its earnings per share by 41% a year over the last three years. It saw its revenue drop 20% over the last year.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has DAVIDsTEA Inc. Been A Good Investment?
Since shareholders would have lost about 58% over three years, some DAVIDsTEA Inc. investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, DAVIDsTEA Inc. is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. It's tough to say that Herschel is earning a very high compensation, but shareholders will likely want to see healthier investor returns before agreeing that a raise is in order.
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 2 warning signs for DAVIDsTEA that investors should be aware of in a dynamic business environment.
Switching gears from DAVIDsTEA, 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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