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Is Paramount Resources Ltd (TSE:POU) Excessively Paying Its CEO?

In 2015 Jim Riddell was appointed CEO of Paramount Resources Ltd (TSE:POU). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we’ll consider growth that the business demonstrates. 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 Paramount Resources

How Does Jim Riddell’s Compensation Compare With Similar Sized Companies?

According to our data, Paramount Resources Ltd has a market capitalization of CA$960m, and pays its CEO total annual compensation worth CA$4.3m. (This number is for the twelve months until 2017). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at CA$403k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of CA$534m to CA$2.1b. The median total CEO compensation was CA$2.0m.

Thus we can conclude that Jim Riddell receives more in total compensation than the median of a group of companies in the same market, and of similar size to Paramount Resources Ltd. However, this doesn’t necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Paramount Resources has changed from year to year.

TSX:POU CEO Compensation November 29th 18

Is Paramount Resources Ltd Growing?

On average over the last three years, Paramount Resources Ltd has grown earnings per share (EPS) by 43% each year. In the last year, its revenue is up 265%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly.

It could be important to check this free visual depiction of what analysts expect for the future.

Has Paramount Resources Ltd Been A Good Investment?

Since shareholders would have lost about 10% over three years, some Paramount Resources Ltd 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 compared total CEO remuneration at Paramount Resources Ltd with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

However, the earnings per share growth over three years is certainly impressive. However, the returns to investors are far less impressive, over the same period. While EPS is positive, we’d say shareholders would want better returns before the CEO is paid much more. So you may want to check if insiders are buying Paramount Resources shares with their own money (free access).

Or you might prefer examine intently this intuitive graph showing past earnings and revenue.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.