U.S. Markets closed

Why Frontier Developments plc's (LON:FDEV) CEO Pay Matters To You

Simply Wall St

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

David Braben is the CEO of Frontier Developments plc (LON:FDEV). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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 method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Frontier Developments

How Does David Braben's Compensation Compare With Similar Sized Companies?

Our data indicates that Frontier Developments plc is worth UK£408m, and total annual CEO compensation is UK£407k. (This number is for the twelve months until May 2018). While we always look at total compensation first, we note that the salary component is less, at UK£200k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of UK£157m to UK£629m. The median total CEO compensation was UK£678k.

This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. While this is a good thing, you'll need to understand the business better before you can form an opinion.

The graphic below shows how CEO compensation at Frontier Developments has changed from year to year.

AIM:FDEV CEO Compensation, June 6th 2019

Is Frontier Developments plc Growing?

Over the last three years Frontier Developments plc has grown its earnings per share (EPS) by an average of 42% per year (using a line of best fit). Its revenue is up 109% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. You might want to check this free visual report on analyst forecasts for future earnings.

Has Frontier Developments plc Been A Good Investment?

Boasting a total shareholder return of 426% over three years, Frontier Developments plc has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

It appears that Frontier Developments plc remunerates its CEO below most similar sized companies. Considering the underlying business is growing earnings, this would suggest the pay is modest. And given most shareholders are probably very happy with recent returns, you might even think that David Braben deserves a raise!

Most shareholders like to see a modestly paid CEO combined with strong performance by the company. But it is even better if company insiders are also buying shares with their own money. Shareholders may want to check for free if Frontier Developments insiders are buying or selling shares.

If you want to buy a stock that is better than Frontier Developments, 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 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.