Philip Kelso became the CEO of Bounty Oil & Gas NL (ASX:BUY) in 2008, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Philip Kelso Compare With Other Companies In The Industry?
At the time of writing, our data shows that Bounty Oil & Gas NL has a market capitalization of AU$20m, and reported total annual CEO compensation of AU$402k for the year to June 2020. That's mostly flat as compared to the prior year's compensation. We note that the salary portion, which stands at AU$398.0k constitutes the majority of total compensation received by the CEO.
On comparing similar-sized companies in the industry with market capitalizations below AU$279m, we found that the median total CEO compensation was AU$358k. This suggests that Bounty Oil & Gas remunerates its CEO largely in line with the industry average. What's more, Philip Kelso holds AU$933k worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 76% of total compensation represents salary, while the remainder of 24% is other remuneration. Bounty Oil & Gas is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. 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.
A Look at Bounty Oil & Gas NL's Growth Numbers
Over the last three years, Bounty Oil & Gas NL has shrunk its earnings per share by 35% per year. Its revenue is down 21% over the previous year.
The decline in EPS is a bit concerning. 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. 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 Bounty Oil & Gas NL Been A Good Investment?
Most shareholders would probably be pleased with Bounty Oil & Gas NL for providing a total return of 200% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
Bounty Oil & Gas pays its CEO a majority of compensation through a salary. As we noted earlier, Bounty Oil & Gas pays its CEO in line with similar-sized companies belonging to the same industry. Some investors may take issue with this, especially considering shrinking EPS for the past three years. But on the bright side, shareholder returns have moved northward during the same period. We do not think CEO compensation is a problem, but shareholders will probably want to see an increase in EPS before agreeing the business should pay any more.
While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 4 warning signs for Bounty Oil & Gas that investors should be aware of in a dynamic business environment.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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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