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Is NETGEAR, Inc.'s (NASDAQ:NTGR) CEO Pay Fair?

Simply Wall St

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Patrick Lo has been the CEO of NETGEAR, Inc. (NASDAQ:NTGR) since 2002. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. 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.

See 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$820m, and is paying total annual CEO compensation of US$7.1m. (This is based on the year to December 2018). Notably, that's an increase of 55% over the year before. We think total compensation is more important but we note that the CEO salary is lower, at US$895k. 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$2.7m.

As you can see, Patrick Lo is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean NETGEAR, Inc. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see a visual representation of the CEO compensation at NETGEAR, below.

NasdaqGS:NTGR CEO Compensation, June 12th 2019

Is NETGEAR, Inc. Growing?

Over the last three years NETGEAR, Inc. has shrunk its earnings per share by an average of 67% per year (measured with a line of best fit). It achieved revenue growth of 11% over the last year.

Sadly for shareholders, earnings per share are actually down, 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. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has NETGEAR, Inc. Been A Good Investment?

Given the total loss of 9.4% over three years, many shareholders in NETGEAR, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by NETGEAR, Inc., and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

We think many shareholders would be underwhelmed with the business growth over the last three years.

Just as bad, share price gains for investors have failed to materialize, over the same period. And we'd be remiss not to note that the CEO remuneration has increased on last year. In our opinion the CEO might be paid too generously! CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling NETGEAR (free visualization of insider trades).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.