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Is NeoPhotonics Corporation (NYSE:NPTN) Overpaying Its CEO?

Simply Wall St

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Tim Jenks has been the CEO of NeoPhotonics Corporation (NYSE:NPTN) since 1998. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for NeoPhotonics

How Does Tim Jenks's Compensation Compare With Similar Sized Companies?

According to our data, NeoPhotonics Corporation has a market capitalization of US$214m, and pays its CEO total annual compensation worth US$2.0m. (This is based on the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$505k. We examined companies with market caps from US$100m to US$400m, and discovered that the median CEO total compensation of that group was US$1.1m.

Thus we can conclude that Tim Jenks receives more in total compensation than the median of a group of companies in the same market, and of similar size to NeoPhotonics Corporation. 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 NeoPhotonics has changed from year to year.

NYSE:NPTN CEO Compensation, July 11th 2019

Is NeoPhotonics Corporation Growing?

NeoPhotonics Corporation has reduced its earnings per share by an average of 72% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 15% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.

Has NeoPhotonics Corporation Been A Good Investment?

Since shareholders would have lost about 56% over three years, some NeoPhotonics Corporation shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We examined the amount NeoPhotonics Corporation pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Neither earnings per share nor revenue have been growing sufficiently fast to impress us, over the last three years.

Arguably worse, investors are without a positive return for the last three years. In our opinion the CEO might be paid too generously! Whatever your view on compensation, you might want to check if insiders are buying or selling NeoPhotonics shares (free trial).

Important note: NeoPhotonics 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.