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Despite positive share price growth of 30% for Optical Cable Corporation (NASDAQ:OCC) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 30 March 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.
How Does Total Compensation For Neil Wilkin Compare With Other Companies In The Industry?
At the time of writing, our data shows that Optical Cable Corporation has a market capitalization of US$29m, and reported total annual CEO compensation of US$474k for the year to October 2020. We note that's a small decrease of 7.3% on last year. We note that the salary portion, which stands at US$455.0k constitutes the majority of total compensation received by the CEO.
On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$429k. This suggests that Optical Cable remunerates its CEO largely in line with the industry average. What's more, Neil Wilkin holds US$3.5m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 29% of total compensation represents salary and 71% is other remuneration. Optical Cable pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
Optical Cable Corporation's Growth
Optical Cable Corporation has reduced its earnings per share by 66% a year over the last three years. It saw its revenue drop 20% over the last year.
The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Optical Cable Corporation Been A Good Investment?
With a total shareholder return of 30% over three years, Optical Cable Corporation shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
Neil receives almost all of their compensation through a salary. Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 4 warning signs (and 2 which can't be ignored) in Optical Cable we think you should know about.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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