Is The Toro Company's (NYSE:TTC) CEO Pay Justified?
In 2016 Rick Olson was appointed CEO of The Toro Company (NYSE:TTC). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
See our latest analysis for Toro
How Does Rick Olson's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that The Toro Company has a market cap of US$8.5b, and reported total annual CEO compensation of US$5.1m for the year to October 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$875k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from US$4.0b to US$12b, we found the median CEO total compensation was US$6.6m.
So Rick Olson is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.
The graphic below shows how CEO compensation at Toro has changed from year to year.
Is The Toro Company Growing?
Over the last three years The Toro Company has grown its earnings per share (EPS) by an average of 9.4% per year (using a line of best fit). Its revenue is up 15% over last year.
This revenue growth could really point to a brighter future. And, while modest, the earnings per share growth is noticeable. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. Shareholders might be interested in this free visualization of analyst forecasts.
Has The Toro Company Been A Good Investment?
I think that the total shareholder return of 49%, over three years, would leave most The Toro Company 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.
In Summary...
Remuneration for Rick Olson is close enough to the median pay for a CEO of a similar sized company .
While we would like to see improved growth metrics, there is no doubt that the total returns have been great, over the last three years. So considering most shareholders would be happy, we'd say the CEO pay is appropriate. Whatever your view on compensation, you might want to check if insiders are buying or selling Toro shares (free trial).
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
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