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The share price of Merit Medical Systems, Inc. (NASDAQ:MMSI) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 17 June 2021. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.
Comparing Merit Medical Systems, Inc.'s CEO Compensation With the industry
Our data indicates that Merit Medical Systems, Inc. has a market capitalization of US$3.4b, and total annual CEO compensation was reported as US$7.7m for the year to December 2020. That's a notable increase of 53% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.7m.
On examining similar-sized companies in the industry with market capitalizations between US$2.0b and US$6.4b, we discovered that the median CEO total compensation of that group was US$5.5m. Accordingly, our analysis reveals that Merit Medical Systems, Inc. pays Fred Lampropoulos north of the industry median. What's more, Fred Lampropoulos holds US$65m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
On an industry level, roughly 22% of total compensation represents salary and 78% is other remuneration. Our data reveals that Merit Medical Systems allocates salary more or less in line with the wider market. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at Merit Medical Systems, Inc.'s Growth Numbers
Over the last three years, Merit Medical Systems, Inc. has shrunk its earnings per share by 40% per year. It saw its revenue drop 3.1% over the last year.
Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Merit Medical Systems, Inc. Been A Good Investment?
With a total shareholder return of 22% over three years, Merit Medical Systems, Inc. shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
Shareholder returns, while positive, should be looked at along with earnings, which have not grown at all recently. This makes us think the share price momentum may slow in the future. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for Merit Medical Systems that you should be aware of before investing.
Important note: Merit Medical Systems is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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. 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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