Bob Pagano became the CEO of Watts Water Technologies, Inc. (NYSE:WTS) in 2014, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Watts Water Technologies, Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that Watts Water Technologies, Inc. has a market capitalization of US$3.8b, and reported total annual CEO compensation of US$5.9m for the year to December 2019. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$923k.
On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$6.7m. So it looks like Watts Water Technologies compensates Bob Pagano in line with the median for the industry. Furthermore, Bob Pagano directly owns US$17m worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 16% of total compensation out of all the companies we analyzed, while other remuneration made up 84% of the pie. Our data reveals that Watts Water Technologies allocates salary more or less in line with the wider market. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at Watts Water Technologies, Inc.'s Growth Numbers
Watts Water Technologies, Inc.'s earnings per share (EPS) grew 10% per year over the last three years. It saw its revenue drop 4.3% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Watts Water Technologies, Inc. Been A Good Investment?
We think that the total shareholder return of 73%, over three years, would leave most Watts Water Technologies, Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
As previously discussed, Bob is compensated close to the median for companies of its size, and which belong to the same industry. The company is growing EPS and total shareholder returns have been pleasing. So one could argue that CEO compensation is quite modest, if you consider company performance! Stockholders might even be okay with a bump in pay, seeing as how investor returns have been so strong.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 2 warning signs for Watts Water Technologies that investors should be aware of in a dynamic business environment.
Important note: Watts Water Technologies 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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