In 2012 Mike Keown was appointed CEO of Farmer Bros. Co. (NASDAQ:FARM). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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. This method should give us information to assess how appropriately the company pays the CEO.
How Does Mike Keown’s Compensation Compare With Similar Sized Companies?
Our data indicates that Farmer Bros. Co. is worth US$405m, and total annual CEO compensation is US$1.5m. (This figure is for the year to 2018). That’s a notable increase of 43% on last year. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$566k. We examined companies with market caps from US$200m to US$800m, and discovered that the median CEO compensation of that group was US$1.6m.
So Mike Keown is paid around the average of the companies we looked at. While this data point isn’t particularly informative alone, it gains more meaning when considered with business performance.
You can see, below, how CEO compensation at Farmer Bros has changed over time.
Is Farmer Bros. Co. Growing?
Over the last three years Farmer Bros. Co. has shrunk its earnings per share by an average of 45% per year. It achieved revenue growth of 15% over the last year.
Few shareholders would be pleased to read that earnings per share are lower over three years. There’s no doubt that the silver lining is that revenue is up. But it isn’t sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.
You might want to check this free visual report on analyst forecasts for future earnings.
Has Farmer Bros. Co. Been A Good Investment?
Given the total loss of 26% over three years, many shareholders in Farmer Bros. Co. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
Mike Keown is paid around what is normal the leaders of comparable size companies.
The company isn’t growing EPS, and shareholder returns have been disappointing. So shareholders might not feel great about the fact that CEO pay increased on last year. Few would argue that it’s wise for the company to pay any more, before returns improve. So you may want to check if insiders are buying Farmer Bros shares with their own money (free access).
Or you could feast your eyes on this interactive graph depicting past earnings, cash flow and revenue.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.