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Is Patterson-UTI Energy, Inc. (NASDAQ:PTEN) Overpaying Its CEO?

Simply Wall St

In 2012 Andy Hendricks was appointed CEO of Patterson-UTI Energy, Inc. (NASDAQ:PTEN). 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 Patterson-UTI Energy

How Does Andy Hendricks's Compensation Compare With Similar Sized Companies?

According to our data, Patterson-UTI Energy, Inc. has a market capitalization of US$1.4b, and paid its CEO total annual compensation worth US$9.8m over the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.0m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a selection of companies with market caps ranging from US$1.0b to US$3.2b, we found the median CEO total compensation was US$3.9m.

Thus we can conclude that Andy Hendricks receives more in total compensation than the median of a group of companies in the same market, and of similar size to Patterson-UTI Energy, Inc.. However, this doesn't necessarily mean the pay 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 Patterson-UTI Energy has changed over time.

NasdaqGS:PTEN CEO Compensation, February 8th 2020

Is Patterson-UTI Energy, Inc. Growing?

Over the last three years Patterson-UTI Energy, Inc. has grown its earnings per share (EPS) by an average of 12% per year (using a line of best fit). It saw its revenue drop 16% over the last year.

This demonstrates that the company has been improving recently. A good result. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. It could be important to check this free visual depiction of what analysts expect for the future.

Has Patterson-UTI Energy, Inc. Been A Good Investment?

Since shareholders would have lost about 73% over three years, some Patterson-UTI Energy, Inc. shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared total CEO remuneration at Patterson-UTI Energy, Inc. 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 we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. Shareholders may want to check for free if Patterson-UTI Energy insiders are buying or selling shares.

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

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.