Is Primoris Services Corporation (NASDAQ:PRIM) Overpaying Its CEO?
In 2015 David King was appointed CEO of Primoris Services Corporation (NASDAQ:PRIM). 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. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.
Check out our latest analysis for Primoris Services
How Does David King's Compensation Compare With Similar Sized Companies?
According to our data, Primoris Services Corporation has a market capitalization of US$969m, and pays its CEO total annual compensation worth US$1.7m. (This figure is for the year to December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$713k. We looked at a group of companies with market capitalizations from US$400m to US$1.6b, and the median CEO total compensation was US$2.7m.
A first glance this seems like a real positive for shareholders, since David King is paid less than the average total compensation paid by similar sized companies. However, before we heap on the praise, we should delve deeper to understand business performance.
The graphic below shows how CEO compensation at Primoris Services has changed from year to year.
Is Primoris Services Corporation Growing?
Primoris Services Corporation has increased its earnings per share (EPS) by an average of 34% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 38%.
This demonstrates that the company has been improving recently. A good result. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Shareholders might be interested in this free visualization of analyst forecasts.
Has Primoris Services Corporation Been A Good Investment?
Since shareholders would have lost about 1.1% over three years, some Primoris Services Corporation shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary...
It appears that Primoris Services Corporation remunerates its CEO below most similar sized companies. Considering the underlying business is growing earnings, this would suggest the pay is modest. Few would deny that the total shareholder return over the last three years could have been a lot better. So while we would not say that David King is generously paid, it would be good to see an improvement in business performance before too an increase in pay.
When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Primoris Services.
Important note: Primoris Services 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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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.
