This article will reflect on the compensation paid to William Johnson who has served as CEO of Strike Resources Limited (ASX:SRK) since 2013. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Strike Resources Limited's CEO Compensation With the industry
Our data indicates that Strike Resources Limited has a market capitalization of AU$22m, and total annual CEO compensation was reported as AU$228k for the year to June 2020. This means that the compensation hasn't changed much from last year. Notably, the salary which is AU$208.0k, represents most of the total compensation being paid.
On comparing similar-sized companies in the industry with market capitalizations below AU$273m, we found that the median total CEO compensation was AU$311k. From this we gather that William Johnson is paid around the median for CEOs in the industry.
On an industry level, around 70% of total compensation represents salary and 30% is other remuneration. It's interesting to note that Strike Resources pays out a greater portion of remuneration through salary, compared to the industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
A Look at Strike Resources Limited's Growth Numbers
Over the last three years, Strike Resources Limited has shrunk its earnings per share by 22% per year. In the last year, its revenue is down 68%.
Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Strike Resources Limited Been A Good Investment?
We think that the total shareholder return of 72%, over three years, would leave most Strike Resources Limited 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 we touched on above, Strike Resources Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. But on the bright side, shareholder returns have moved northward during the same period. We wouldn't say CEO compensation is too high, but shareholders might think performance needs to be improved before paying any more.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 5 warning signs for Strike Resources (of which 2 are potentially serious!) that you should know about in order to have a holistic understanding of the 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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