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Is Newcrest Mining Limited's (ASX:NCM) CEO Pay Justified?

Simply Wall St

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Sandeep Biswas became the CEO of Newcrest Mining Limited (ASX:NCM) in 2014. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Newcrest Mining

How Does Sandeep Biswas's Compensation Compare With Similar Sized Companies?

Our data indicates that Newcrest Mining Limited is worth AU$24b, and total annual CEO compensation is US$6.4m. (This figure is for the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.8m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$3.5m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

Thus we can conclude that Sandeep Biswas receives more in total compensation than the median of a group of large companies in the same market as Newcrest Mining Limited. 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 Newcrest Mining has changed from year to year.

ASX:NCM CEO Compensation, July 10th 2019

Is Newcrest Mining Limited Growing?

On average over the last three years, Newcrest Mining Limited has shrunk earnings per share by 10% each year (measured with a line of best fit). In the last year, its revenue is up 5.6%.

Few shareholders would be pleased to read that earnings per share are lower over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Newcrest Mining Limited Been A Good Investment?

Newcrest Mining Limited has served shareholders reasonably well, with a total return of 24% over three years. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

We compared the total CEO remuneration paid by Newcrest Mining Limited, and compared it to remuneration at a group of other large companies. We found that it pays well over the median amount paid in the benchmark group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us.

While shareholder returns are acceptable, they don't delight. So we doubt many shareholders would consider the CEO pay to be particularly modest! CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Newcrest Mining (free visualization of insider trades).

If you want to buy a stock that is better than Newcrest Mining, this free list of high return, low debt companies is a great place to look.

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.