Jeff Mezger has been the CEO of KB Home (NYSE:KBH) since 2006. 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Jeff Mezger's Compensation Compare With Similar Sized Companies?
Our data indicates that KB Home is worth US$2.3b, and total annual CEO compensation is US$12m. (This number is for the twelve months until November 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.2m. When we examined a selection of companies with market caps ranging from US$1.0b to US$3.2b, we found the median CEO total compensation was US$4.0m.
Thus we can conclude that Jeff Mezger receives more in total compensation than the median of a group of companies in the same market, and of similar size to KB Home. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at KB Home has changed from year to year.
Is KB Home Growing?
On average over the last three years, KB Home has grown earnings per share (EPS) by 31% each year (using a line of best fit). In the last year, its revenue is down -2.5%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. You might want to check this free visual report on analyst forecasts for future earnings.
Has KB Home Been A Good Investment?
Boasting a total shareholder return of 74% over three years, KB Home has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at KB Home with the amount paid at companies with a similar market capitalization. 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. So, considering this good performance, the CEO compensation may be quite appropriate. So you may want to check if insiders are buying KB Home shares with their own money (free access).
Important note: KB Home 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.
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