Eugene Seymour took the helm as NanoViricides Inc’s (AMEX:NNVC) CEO and grew market cap to US$58.43M recently. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Seymour’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. Check out our latest analysis for NanoViricides
What has NNVC’s performance been like?
NNVC can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Over the last year NNVC delivered negative earnings of -US$10.50M . However, this is an improvement on prior year’s loss of -US$11.25M, which may signal a turnaround since NNVC has been loss-making for the past five years, on average, with an EPS of -US$0.17. Given earnings are moving the right way, CEO pay should mirror Seymour’s hard work. During this period Seymour’s total compensation grew by a mere 2.05% to US$745.18K. Moreover, Seymour’s pay is also made up of 77.11% non-cash elements, which means that variabilities in NNVC’s share price can affect the real level of what the CEO actually collects at the end of the year.
Is NNVC’s CEO overpaid relative to the market?
Even though there is no cookie-cutter approach, as compensation should be tailored to the specific company and market, we can estimate a high-level yardstick to see if NNVC is an outlier. This exercise can help shareholders ask the right question about Seymour’s incentive alignment. Generally, a US small-cap is worth around $1B, produces earnings of $96M, and pays its CEO at roughly $2.7M annually. Typically I would use earnings and market cap to account for variations in performance, however, NNVC’s negative earnings reduces the usefulness of my formula. Looking at the range of compensation for small-cap executives, it seems like Seymour is paid aptly compared to those in similar-sized companies. Overall, even though NNVC is unprofitable, it seems like the CEO’s pay is sound.
Hopefully this article has given you insight on how shareholders should think about NNVC’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about NNVC’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NNVC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.