Li Yu has been the CEO of Preferred Bank (NASDAQ:PFBC) since 1993. 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. This process should give us an idea about how appropriately the CEO is paid.
How Does Li Yu’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Preferred Bank has a market cap of US$785m, and is paying total annual CEO compensation of US$4.9m. (This is based on the year to December 2017). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$916k. We looked at a group of companies with market capitalizations from US$400m to US$1.6b, and the median CEO compensation was US$2.2m.
It would therefore appear that Preferred Bank pays Li Yu more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration 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 Preferred Bank has changed from year to year.
Is Preferred Bank Growing?
Preferred Bank has increased its earnings per share (EPS) by an average of 24% a year, over the last three years (using a line of best fit). Its revenue is up 22% over last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. It’s a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. It could be important to check this free visual depiction of what analysts expect for the future.
Has Preferred Bank Been A Good Investment?
Boasting a total shareholder return of 78% over three years, Preferred Bank has done well by shareholders. 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.
We examined the amount Preferred Bank pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
However we must not forget that the EPS growth has been very strong over three years. On top of that, in the same period, returns to shareholders have been great. As a result of this good performance, the CEO remuneration may well be quite reasonable. Shareholders may want to check for free if Preferred Bank insiders are buying or selling shares.
Important note: Preferred Bank may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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