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Fabrizio Freda became the CEO of The Estée Lauder Companies Inc. (NYSE:EL) in 2009. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.
How Does Fabrizio Freda's Compensation Compare With Similar Sized Companies?
Our data indicates that The Estée Lauder Companies Inc. is worth US$69b, and total annual CEO compensation is US$49m. (This is based on the year to June 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.9m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
As you can see, Fabrizio Freda is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean The Estée Lauder Companies Inc. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at Estée Lauder Companies has changed over time.
Is The Estée Lauder Companies Inc. Growing?
The Estée Lauder Companies Inc. has increased its earnings per share (EPS) by an average of 12% a year, over the last three years (using a line of best fit). Its revenue is up 9.7% over last year.
This demonstrates that the company has been improving recently. A good result. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Shareholders might be interested in this free visualization of analyst forecasts.
Has The Estée Lauder Companies Inc. Been A Good Investment?
Most shareholders would probably be pleased with The Estée Lauder Companies Inc. for providing a total return of 111% 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.
We examined the amount The Estée Lauder Companies Inc. pays its CEO, and compared it to the amount paid by other large companies. As discussed above, we discovered that the company pays more than the median of that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. Even better, returns to shareholders have been plentiful, over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. So you may want to check if insiders are buying Estée Lauder Companies shares with their own money (free access).
If you want to buy a stock that is better than Estée Lauder Companies, this free list of high return, low debt companies is a great place to look.
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 firstname.lastname@example.org. 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.