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Is Starpharma Holdings Limited's (ASX:SPL) CEO Overpaid Relative To Its Peers?

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Simply Wall St
·4 min read
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Jackie Fairley has been the CEO of Starpharma Holdings Limited (ASX:SPL) since 2006. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Starpharma Holdings

How Does Jackie Fairley's Compensation Compare With Similar Sized Companies?

According to our data, Starpharma Holdings Limited has a market capitalization of AU$404m, and paid its CEO total annual compensation worth AU$1.7m over the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$492k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a selection of companies with market caps ranging from AU$155m to AU$622m, we found the median CEO total compensation was AU$850k.

Next, let's break down remuneration compositions to understand how the industry and company compare with each other. On a sector level, around 58% of total compensation represents salary and 42% is other remuneration. It's interesting to note that Starpharma Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry.

It would therefore appear that Starpharma Holdings Limited pays Jackie Fairley 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. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous. You can see a visual representation of the CEO compensation at Starpharma Holdings, below.

ASX:SPL CEO Compensation May 5th 2020
ASX:SPL CEO Compensation May 5th 2020

Is Starpharma Holdings Limited Growing?

Over the last three years Starpharma Holdings Limited has seen earnings per share (EPS) move in a positive direction by an average of 10% per year (using a line of best fit). It achieved revenue growth of 77% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. You might want to check this free visual report on analyst forecasts for future earnings.

Has Starpharma Holdings Limited Been A Good Investment?

Boasting a total shareholder return of 36% over three years, Starpharma Holdings Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We examined the amount Starpharma Holdings Limited pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

However we must not forget that the EPS growth has been very strong over three years. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. Shifting gears from CEO pay for a second, we've picked out 2 warning signs for Starpharma Holdings that investors should be aware of in a dynamic business environment.

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

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.