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George Kirby became the CEO of Ocean Power Technologies, Inc. (NASDAQ:OPTT) in 2015, 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 Ocean Power Technologies pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Ocean Power Technologies, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Ocean Power Technologies, Inc. has a market capitalization of US$145m, and reported total annual CEO compensation of US$520k for the year to April 2020. Notably, that's a decrease of 28% over the year before. We note that the salary portion, which stands at US$391.1k constitutes the majority of total compensation received by the CEO.
For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$463k. From this we gather that George Kirby is paid around the median for CEOs in the industry.
Talking in terms of the industry, salary represented approximately 26% of total compensation out of all the companies we analyzed, while other remuneration made up 74% of the pie. Ocean Power Technologies is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
Ocean Power Technologies, Inc.'s Growth
Ocean Power Technologies, Inc.'s earnings per share (EPS) grew 78% per year over the last three years. In the last year, its revenue is up 79%.
Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Ocean Power Technologies, Inc. Been A Good Investment?
Given the total shareholder loss of 79% over three years, many shareholders in Ocean Power Technologies, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
As previously discussed, George is compensated close to the median for companies of its size, and which belong to the same industry. At the same time, the company has logged negative shareholder returns over the last three years. However, EPS growth is positive over the same time frame. Considering positive EPS growth, we'd say compensation is fair, but shareholders may be wary of a bump in pay before the company logs positive returns.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 3 warning signs for Ocean Power Technologies you should be aware of, and 1 of them shouldn't be ignored.
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.
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