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Is L'Oréal S.A.'s (EPA:OR) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2006 Jean-Paul Agon was appointed CEO of L'Oréal S.A. (EPA:OR). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. 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.

View our latest analysis for L'Oréal

How Does Jean-Paul Agon's Compensation Compare With Similar Sized Companies?

Our data indicates that L'Oréal S.A. is worth €147b, and total annual CEO compensation was reported as €9.5m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at €2.2m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations over €7.2b and the median CEO total compensation was €3.2m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

It would therefore appear that L'Oréal S.A. pays Jean-Paul Agon more than the median CEO remuneration at large companies, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at L'Oréal has changed over time.

ENXTPA:OR CEO Compensation, November 8th 2019

Is L'Oréal S.A. Growing?

Over the last three years L'Oréal S.A. has grown its earnings per share (EPS) by an average of 10% per year (using a line of best fit). Its revenue is up 9.1% over last year.

This demonstrates that the company has been improving recently. A good result. It's also good to see modest revenue growth, suggesting the underlying business is healthy. You might want to check this free visual report on analyst forecasts for future earnings.

Has L'Oréal S.A. Been A Good Investment?

Boasting a total shareholder return of 75% over three years, L'Oréal S.A. 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.

In Summary...

We compared the total CEO remuneration paid by L'Oréal S.A., and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. On top of that, in the same period, returns to shareholders have been great. As a result of this good performance, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling L'Oréal (free visualization of insider trades).

Important note: L'Oréal 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.