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Is Parker-Hannifin Corporation (NYSE:PH) Excessively Paying Its CEO?

Simply Wall St

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In 2015 Thomas Williams was appointed CEO of Parker-Hannifin Corporation (NYSE:PH). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Parker-Hannifin

How Does Thomas Williams's Compensation Compare With Similar Sized Companies?

Our data indicates that Parker-Hannifin Corporation is worth US$24b, and total annual CEO compensation is US$18m. (This figure is for the year to June 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$1.2m. We looked at a group of companies with market capitalizations over US$8.0b and the median CEO total compensation was US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.

As you can see, Thomas Williams is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Parker-Hannifin Corporation is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see a visual representation of the CEO compensation at Parker-Hannifin, below.

NYSE:PH CEO Compensation, April 9th 2019

Is Parker-Hannifin Corporation Growing?

On average over the last three years, Parker-Hannifin Corporation has grown earnings per share (EPS) by 17% each year (using a line of best fit). In the last year, its revenue is up 8.7%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.

Has Parker-Hannifin Corporation Been A Good Investment?

Most shareholders would probably be pleased with Parker-Hannifin Corporation for providing a total return of 75% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

We compared total CEO remuneration at Parker-Hannifin Corporation with the amount paid at other large companies. We found that it pays well over the median amount paid in the benchmark group.

However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Parker-Hannifin (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.