This article will reflect on the compensation paid to Zhilin Li who has served as CEO of China Pharma Holdings, Inc. (NYSEMKT:CPHI) since 2005. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing China Pharma Holdings, Inc.'s CEO Compensation With the industry
According to our data, China Pharma Holdings, Inc. has a market capitalization of US$17m, and paid its CEO total annual compensation worth US$242k over the year to December 2019. This means that the compensation hasn't changed much from last year. Notably, the salary which is US$225.6k, represents most of the total compensation being paid.
For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$843k. That is to say, Zhilin Li is paid under the industry median. What's more, Zhilin Li holds US$3.9m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 24% of total compensation represents salary and 76% is other remuneration. According to our research, China Pharma Holdings has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
China Pharma Holdings, Inc.'s Growth
China Pharma Holdings, Inc. has reduced its earnings per share by 13% a year over the last three years. The trailing twelve months of revenue was pretty much the same as the prior period.
The decline in EPS is a bit concerning. And the flat revenue is seriously uninspiring. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has China Pharma Holdings, Inc. Been A Good Investment?
We think that the total shareholder return of 141%, over three years, would leave most China Pharma Holdings, Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
As previously discussed, Zhilin is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. And while EPS growth is negative, shareholder returns have been healthy recently. We would like to see EPS growth, but in our view CEO compensation is modest.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for China Pharma Holdings that investors should think about before committing capital to this stock.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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