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Is Rapid7, Inc. (NASDAQ:RPD) Overpaying Its CEO?

Simply Wall St

Corey Thomas became the CEO of Rapid7, Inc. (NASDAQ:RPD) in 2012. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Rapid7

How Does Corey Thomas's Compensation Compare With Similar Sized Companies?

According to our data, Rapid7, Inc. has a market capitalization of US$2.2b, and paid its CEO total annual compensation worth US$5.0m over the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$350k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$1.0b to US$3.2b. The median total CEO compensation was US$4.8m.

Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Rapid7. On a sector level, around 13% of total compensation represents salary and 87% is other remuneration. It's interesting to note that Rapid7 allocates a smaller portion of compensation to salary in comparison to the broader industry.

So Corey Thomas is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. The graphic below shows how CEO compensation at Rapid7 has changed from year to year.

NasdaqGM:RPD CEO Compensation April 15th 2020

Is Rapid7, Inc. Growing?

Over the last three years, Rapid7, Inc. has not seen its earnings per share change much, though they have deteriorated slightly, according to a line of best fit. Its revenue is up 34% over last year.

Investors should note that, over three years, earnings per share are down. On the other hand, the strong revenue growth suggests the business is growing. These two metric are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has Rapid7, Inc. Been A Good Investment?

Most shareholders would probably be pleased with Rapid7, Inc. for providing a total return of 159% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Corey Thomas is paid around what is normal for the leaders of comparable size companies.

While the growth could be better, the shareholder returns are clearly good. So we can conclude that on this analysis the CEO compensation seems pretty sound. On another note, we've spotted 3 warning signs for Rapid7 that investors should look into moving forward.

Important note: Rapid7 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.

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.

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. Thank you for reading.