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Is ThinkSmart Limited's (LON:TSL) CEO Salary Justified?

Simply Wall St

Ned Montarello is the CEO of ThinkSmart Limited (LON:TSL). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. 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.

See our latest analysis for ThinkSmart

How Does Ned Montarello's Compensation Compare With Similar Sized Companies?

According to our data, ThinkSmart Limited has a market capitalization of UK£21m, and paid its CEO total annual compensation worth UK£372k over the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at UK£163k. We examined a group of similar sized companies, with market capitalizations of below UK£154m. The median CEO total compensation in that group is UK£251k.

Thus we can conclude that Ned Montarello receives more in total compensation than the median of a group of companies in the same market, and of similar size to ThinkSmart Limited. However, this doesn't necessarily mean the pay 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.

The graphic below shows how CEO compensation at ThinkSmart has changed from year to year.

AIM:TSL CEO Compensation, January 16th 2020

Is ThinkSmart Limited Growing?

On average over the last three years, ThinkSmart Limited has shrunk earnings per share by 24% each year (measured with a line of best fit). Its revenue is down 15% over last year.

Sadly for shareholders, earnings per share are actually down, over three years. 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. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has ThinkSmart Limited Been A Good Investment?

I think that the total shareholder return of 83%, over three years, would leave most ThinkSmart Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We compared total CEO remuneration at ThinkSmart Limited with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

We think many shareholders would be underwhelmed with the business growth over the last three years. However, we can't argue with the strong returns to shareholders, over the same time period. Considering this, shareholders are probably not too worried about the CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling ThinkSmart (free visualization of insider trades).

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.

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.