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Is Proteostasis Therapeutics, Inc. (NASDAQ:PTI) Excessively Paying Its CEO?

Simply Wall St

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In 2014 Meenu Chhabra was appointed CEO of Proteostasis Therapeutics, Inc. (NASDAQ:PTI). First, this article will compare CEO compensation with compensation at similar sized companies. 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 method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Proteostasis Therapeutics

How Does Meenu Chhabra's Compensation Compare With Similar Sized Companies?

Our data indicates that Proteostasis Therapeutics, Inc. is worth US$51m, and total annual CEO compensation is US$1.3m. (This is based on the year to December 2018). While we always look at total compensation first, we note that the salary component is less, at US$515k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO total compensation to be US$471k.

It would therefore appear that Proteostasis Therapeutics, Inc. pays Meenu Chhabra 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 Proteostasis Therapeutics has changed from year to year.

NasdaqGM:PTI CEO Compensation, July 15th 2019

Is Proteostasis Therapeutics, Inc. Growing?

On average over the last three years, Proteostasis Therapeutics, Inc. has grown earnings per share (EPS) by 50% each year (using a line of best fit). In the last year, its revenue is up 31%.

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 Proteostasis Therapeutics, Inc. Been A Good Investment?

Since shareholders would have lost about 91% over three years, some Proteostasis Therapeutics, Inc. 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 the total CEO remuneration paid by Proteostasis Therapeutics, Inc., and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. On the other hand returns to investors over the same period have probably disappointed many. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Proteostasis Therapeutics (free visualization of insider trades).

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

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.