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We Think Shareholders Are Less Likely To Approve A Pay Rise For SigmaTron International, Inc.'s (NASDAQ:SGMA) CEO For Now

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In the past three years, shareholders of SigmaTron International, Inc. (NASDAQ:SGMA) have seen a loss on their investment. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 15 September 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for SigmaTron International

Comparing SigmaTron International, Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that SigmaTron International, Inc. has a market capitalization of US$27m, and reported total annual CEO compensation of US$337k for the year to April 2021. That's mostly flat as compared to the prior year's compensation. Notably, the salary which is US$305.8k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$444k. So it looks like SigmaTron International compensates Gary Fairhead in line with the median for the industry. Furthermore, Gary Fairhead directly owns US$554k worth of shares in the company.

Component

2021

2020

Proportion (2021)

Salary

US$306k

US$300k

91%

Other

US$32k

US$46k

9%

Total Compensation

US$337k

US$346k

100%

Talking in terms of the industry, salary represented approximately 29% of total compensation out of all the companies we analyzed, while other remuneration made up 71% of the pie. SigmaTron International pays out 91% of remuneration in the form of a salary, significantly higher than the industry average. 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.

ceo-compensation
ceo-compensation

A Look at SigmaTron International, Inc.'s Growth Numbers

SigmaTron International, Inc. has seen its earnings per share (EPS) increase by 91% a year over the past three years. Its revenue is down 1.2% over the previous year.

This demonstrates that the company has been improving recently and is good news for the shareholders. While it would be good to see revenue growth, profits matter more in the end. 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 SigmaTron International, Inc. Been A Good Investment?

Given the total shareholder loss of 4.0% over three years, many shareholders in SigmaTron International, Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 4 warning signs (and 2 which are a bit unpleasant) in SigmaTron International we think you should know about.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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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