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Is Valhi, Inc. (NYSE:VHI) Excessively Paying Its CEO?

Simply Wall St

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Robert Graham became the CEO of Valhi, Inc. (NYSE:VHI) in 2017. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Valhi

How Does Robert Graham's Compensation Compare With Similar Sized Companies?

Our data indicates that Valhi, Inc. is worth US$807m, and total annual CEO compensation is US$5.8m. (This is based on the year to December 2018). Notably, the salary of US$5.8m is the vast majority of the CEO compensation. We looked at a group of companies with market capitalizations from US$400m to US$1.6b, and the median CEO total compensation was US$2.7m.

It would therefore appear that Valhi, Inc. pays Robert Graham more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration 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.

You can see a visual representation of the CEO compensation at Valhi, below.

NYSE:VHI CEO Compensation, July 15th 2019

Is Valhi, Inc. Growing?

On average over the last three years, Valhi, Inc. has grown earnings per share (EPS) by 80% each year (using a line of best fit). In the last year, its revenue is down -5.5%.

This demonstrates that the company has been improving recently. A good result. While it would be good to see revenue growth, profits matter more in the end. Although we don't have analyst forecasts, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Valhi, Inc. Been A Good Investment?

Most shareholders would probably be pleased with Valhi, Inc. for providing a total return of 36% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

We examined the amount Valhi, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling Valhi shares (free trial).

Important note: Valhi may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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.

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. Thank you for reading.