We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Hovnanian Enterprises, Inc.'s (NYSE:HOV) CEO For Now
Key Insights
Hovnanian Enterprises will host its Annual General Meeting on 28th of March
CEO Ara Hovnanian's total compensation includes salary of US$1.15m
Total compensation is 223% above industry average
Hovnanian Enterprises' EPS grew by 41% over the past three years while total shareholder return over the past three years was 476%
Performance at Hovnanian Enterprises, Inc. (NYSE:HOV) has been reasonably good and CEO Ara Hovnanian has done a decent job of steering the company in the right direction. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 28th of March. However, some shareholders may still want to keep CEO compensation within reason.
View our latest analysis for Hovnanian Enterprises
Comparing Hovnanian Enterprises, Inc.'s CEO Compensation With The Industry
Our data indicates that Hovnanian Enterprises, Inc. has a market capitalization of US$377m, and total annual CEO compensation was reported as US$17m for the year to October 2022. That's a notable increase of 32% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$1.2m.
On examining similar-sized companies in the American Consumer Durables industry with market capitalizations between US$200m and US$800m, we discovered that the median CEO total compensation of that group was US$5.1m. This suggests that Ara Hovnanian is paid more than the median for the industry. What's more, Ara Hovnanian holds US$74m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2022 | 2021 | Proportion (2022) |
Salary | US$1.2m | US$1.3m | 7% |
Other | US$15m | US$11m | 93% |
Total Compensation | US$17m | US$12m | 100% |
On an industry level, around 17% of total compensation represents salary and 83% is other remuneration. Hovnanian Enterprises pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Hovnanian Enterprises, Inc.'s Growth
Hovnanian Enterprises, Inc. has seen its earnings per share (EPS) increase by 41% a year over the past three years. It achieved revenue growth of 3.6% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
Has Hovnanian Enterprises, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Hovnanian Enterprises, Inc. for providing a total return of 476% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for Hovnanian Enterprises (of which 1 is concerning!) 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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