In 2013 Mick Farrell was appointed CEO of ResMed Inc. (NYSE:RMD). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Mick Farrell's Compensation Compare With Similar Sized Companies?
According to our data, ResMed Inc. has a market capitalization of US$21b, and paid its CEO total annual compensation worth US$9.6m over the year to June 2019. That's a fairly small increase of 6.1% on year before. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$967k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
So Mick Farrell receives a similar amount to the median CEO pay, amongst the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.
You can see, below, how CEO compensation at ResMed has changed over time.
Is ResMed Inc. Growing?
On average over the last three years, ResMed Inc. has grown earnings per share (EPS) by 9.3% each year (using a line of best fit). In the last year, its revenue is up 12%.
I think the revenue growth is good. And the improvement in earnings per share is modest but respectable. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. It could be important to check this free visual depiction of what analysts expect for the future.
Has ResMed Inc. Been A Good Investment?
Boasting a total shareholder return of 164% over three years, ResMed Inc. 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.
Mick Farrell is paid around the same as most CEOs of large companies.
While the growth could be better, the shareholder returns are clearly good. So all things considered I'd venture that the CEO pay is appropriate. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at ResMed.
Important note: ResMed 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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