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The share price of Essent Group Ltd. (NYSE:ESNT) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 05 May 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
Comparing Essent Group Ltd.'s CEO Compensation With the industry
At the time of writing, our data shows that Essent Group Ltd. has a market capitalization of US$6.0b, and reported total annual CEO compensation of US$6.8m for the year to December 2020. That's a notable decrease of 16% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$925k.
For comparison, other companies in the same industry with market capitalizations ranging between US$4.0b and US$12b had a median total CEO compensation of US$6.1m. So it looks like Essent Group compensates Mark Casale in line with the median for the industry. Moreover, Mark Casale also holds US$101m worth of Essent Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Talking in terms of the broader industry, salary and other compensation roughly make up 50% each, of the total compensation. In Essent Group's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Essent Group Ltd.'s Growth Numbers
Essent Group Ltd. has reduced its earnings per share by 1.5% a year over the last three years. In the last year, its revenue is up 10%.
The lack of EPS growth is certainly uninspiring. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Essent Group Ltd. Been A Good Investment?
Most shareholders would probably be pleased with Essent Group Ltd. for providing a total return of 60% over three years. 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.
Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 2 warning signs for Essent Group that investors should look into moving forward.
Important note: Essent Group 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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