This article will reflect on the compensation paid to Adam Davis who has served as CEO of UCW Limited (ASX:UCW) since 2016. This analysis will also assess whether UCW pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing UCW Limited's CEO Compensation With the industry
Our data indicates that UCW Limited has a market capitalization of AU$24m, and total annual CEO compensation was reported as AU$306k for the year to June 2020. That's just a smallish increase of 7.9% on last year. We note that the salary portion, which stands at AU$256.5k constitutes the majority of total compensation received by the CEO.
On comparing similar-sized companies in the industry with market capitalizations below AU$264m, we found that the median total CEO compensation was AU$503k. In other words, UCW pays its CEO lower than the industry median. Moreover, Adam Davis also holds AU$1.6m worth of UCW stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
On an industry level, around 76% of total compensation represents salary and 24% is other remuneration. Although there is a difference in how total compensation is set, UCW more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at UCW Limited's Growth Numbers
Over the last three years, UCW Limited has shrunk its earnings per share by 118% per year. It achieved revenue growth of 15% over the last year.
Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has UCW Limited Been A Good Investment?
With a total shareholder return of 22% over three years, UCW Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we touched on above, UCW Limited is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. And revenue growth for the company is showing some positive trends.And revenues are growing at a healthy clip.And revenues are increasing at a good pace over the past year. But we were hoping for higher shareholder returns and positive EPS growth during this stretch, which, unfortunately, did not materialize. We won't say CEO compensation is inappropriate, but shareholders will likely want to see healthier returns before they agree the company deserves a raise.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 2 warning signs for UCW (1 doesn't sit too well with us!) that you should be aware of before investing here.
Important note: UCW is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.