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Is NETGEAR, Inc.'s (NASDAQ:NTGR) CEO Overpaid Relative To Its Peers?

Simply Wall St

In 2002 Patrick Lo was appointed CEO of NETGEAR, Inc. (NASDAQ:NTGR). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for NETGEAR

How Does Patrick Lo's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that NETGEAR, Inc. has a market cap of US$717m, and reported total annual CEO compensation of US$7.1m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$895k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$400m to US$1.6b. The median total CEO compensation was US$2.6m.

It would therefore appear that NETGEAR, Inc. pays Patrick Lo more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see, below, how CEO compensation at NETGEAR has changed over time.

NasdaqGS:NTGR CEO Compensation, December 16th 2019

Is NETGEAR, Inc. Growing?

On average over the last three years, NETGEAR, Inc. has shrunk earnings per share by 53% each year (measured with a line of best fit). It achieved revenue growth of 29% over the last year.

Investors should note that, over three years, earnings per share are down. On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. It could be important to check this free visual depiction of what analysts expect for the future.

Has NETGEAR, Inc. Been A Good Investment?

Given the total loss of 31% over three years, many shareholders in NETGEAR, Inc. are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We examined the amount NETGEAR, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Over the last three years, shareholder returns have been downright disappointing, and the underlying business has failed to impress us. Shareholders may wish to consider further research. Although we don't think the CEO pay is too high, it is probably more on the generous side of things. So you may want to check if insiders are buying NETGEAR shares with their own money (free access).

Important note: NETGEAR 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.

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.

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. Thank you for reading.