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In 1998 Jeff Gorman was appointed CEO of The Gorman-Rupp Company (NYSE:GRC). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we'll look at a snap shot of the business growth. 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 Jeff Gorman's Compensation Compare With Similar Sized Companies?
Our data indicates that The Gorman-Rupp Company is worth US$965m, and total annual CEO compensation was reported as US$1.1m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$460k. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.6m.
This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. However, before we heap on the praise, we should delve deeper to understand business performance.
The graphic below shows how CEO compensation at Gorman-Rupp has changed from year to year.
Is The Gorman-Rupp Company Growing?
The Gorman-Rupp Company has increased its earnings per share (EPS) by an average of 19% a year, over the last three years (using a line of best fit). The trailing twelve months of revenue was pretty much the same as the prior period.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.
Has The Gorman-Rupp Company Been A Good Investment?
With a total shareholder return of 27% over three years, The Gorman-Rupp Company shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
It looks like The Gorman-Rupp Company pays its CEO less than similar sized companies.
Considering the underlying business is growing earnings, this would suggest the pay is modest. The total shareholder return might not be amazing, but that doesn't mean that Jeff Gorman is paid too much. It's good to see reasonable payment of the CEO, even while the business improves. But for me, it's even better if insiders are also buying shares with their own cold, hard, cash. So you may want to check if insiders are buying Gorman-Rupp shares with their own money (free access).
Important note: Gorman-Rupp 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.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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