Is Pulse Biosciences Inc’s (NASDAQ:PLSE) CEO Incentives Align With Yours?
Darrin Uecker is the CEO of Pulse Biosciences Inc (NASDAQ:PLSE), which has recently grown to a market capitalization of US$266.53M. Recognizing whether CEO incentives are aligned with shareholders is a crucial part of investing. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Uecker’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. Check out our latest analysis for Pulse Biosciences
What has PLSE’s performance been like?
Earnings is a powerful indication of PLSE’s ability to invest shareholders’ funds and generate returns. Therefore I will use earnings as a proxy of Uecker’s performance in the past year. Over the last year PLSE delivered negative earnings of -US$19.67M , which is a further decline from prior year’s loss of -US$7.73M. Additionally, on average, PLSE has been loss-making in the past, with a 5-year average EPS of -US$0.71. During times of unprofitability the company may be going through a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should be reflective of the current state of the business. In the most recent financial report, Uecker’s total remuneration declined by more than half of the prior year’s level, to US$393.63K. In addition to this, Uecker’s pay is also comprised of non-cash elements, which means that fluxes in PLSE’s share price can impact the real level of what the CEO actually collects at the end of the year.
Is PLSE’s CEO overpaid relative to the market?
While no standard benchmark exists, since compensation should be tailored to the specific company and market, we can evaluate a high-level base line to see if PLSE deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Uecker’s incentive alignment. On average, a US small-cap is worth around $1B, creates earnings of $96M, and pays its CEO at roughly $2.7M per annum. Typically I would use earnings and market cap to account for variations in performance, however, PLSE’s negative earnings reduces the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Uecker is being paid within the bounds of reasonableness. On the whole, although PLSE is loss-making, it seems like the CEO’s pay is sound.
Next Steps:
Hopefully this article has given you insight on how shareholders should think about PLSE’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. If you have not done so already, I urge you to complete your research by taking a look at the following:
Governance: To find out more about PLSE’s governance, look through our infographic report of the company’s board and management.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PLSE? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
