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Is McGrath RentCorp's (NASDAQ:MGRC) CEO Salary Justified?

Simply Wall St

Joe Hanna became the CEO of McGrath RentCorp (NASDAQ:MGRC) in 2017. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for McGrath RentCorp

How Does Joe Hanna's Compensation Compare With Similar Sized Companies?

According to our data, McGrath RentCorp has a market capitalization of US$1.7b, and pays its CEO total annual compensation worth US$2.5m. (This is based on the year to December 2018). While we always look at total compensation first, we note that the salary component is less, at US$573k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$4.1m.

Most shareholders would consider it a positive that Joe Hanna takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.

You can see, below, how CEO compensation at McGrath RentCorp has changed over time.

NasdaqGS:MGRC CEO Compensation, September 18th 2019

Is McGrath RentCorp Growing?

On average over the last three years, McGrath RentCorp has grown earnings per share (EPS) by 35% each year (using a line of best fit). It achieved revenue growth of 9.6% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.

Has McGrath RentCorp Been A Good Investment?

I think that the total shareholder return of 136%, over three years, would leave most McGrath RentCorp shareholders smiling. 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...

It appears that McGrath RentCorp remunerates its CEO below most similar sized companies. Since the business is growing, many would argue this suggests the pay is modest. The strong history of shareholder returns might even have some thinking that Joe Hanna deserves a raise!

It is relatively rare to see a modestly paid CEO when performance is so impressive. It would be even more positive if company insiders are buying shares. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling McGrath RentCorp (free visualization of insider trades).

Important note: McGrath RentCorp 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.