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Despite strong share price growth of 40% for Altra Industrial Motion Corp. (NASDAQ:AIMC) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 21 April 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. 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. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
Comparing Altra Industrial Motion Corp.'s CEO Compensation With the industry
According to our data, Altra Industrial Motion Corp. has a market capitalization of US$4.0b, and paid its CEO total annual compensation worth US$6.2m over the year to December 2020. We note that's an increase of 11% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$927k.
On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$5.7m. This suggests that Altra Industrial Motion remunerates its CEO largely in line with the industry average. Furthermore, Carl Christenson directly owns US$16m worth of shares in the company, implying that they are deeply invested in the company's success.
Talking in terms of the industry, salary represented approximately 19% of total compensation out of all the companies we analyzed, while other remuneration made up 81% of the pie. In Altra Industrial Motion's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Altra Industrial Motion Corp.'s Growth
Over the last three years, Altra Industrial Motion Corp. has shrunk its earnings per share by 68% per year. It saw its revenue drop 5.9% over the last year.
The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Altra Industrial Motion Corp. Been A Good Investment?
Boasting a total shareholder return of 40% over three years, Altra Industrial Motion Corp. has done well by shareholders. 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.
While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 2 warning signs for Altra Industrial Motion you should be aware of, and 1 of them is potentially serious.
Important note: Altra Industrial Motion 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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