Why Jaguar Health Inc’s (NASDAQ:JAGX) CEO Pay Matters To You
Leading Jaguar Health Inc (NASDAQ:JAGX) as the CEO, Lisa Conte took the company to a valuation of US$32.95M. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. Today we will assess Conte’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability. See our latest analysis for Jaguar Health
Did Conte create value?
Profitability of a company is a strong indication of JAGX’s ability to generate returns on shareholders’ funds through corporate activities. In this exercise, I will use profits as a proxy for Conte’s performance. Recently, JAGX produced negative earnings of -US$11.10M . However, this is an improvement on prior year’s loss of -US$13.93M, which may signal a turnaround since JAGX has been loss-making for the past five years, on average, with an EPS of -US$0.13. As profits are moving up and up, CEO pay should echo Conte’s hard work. During this period Conte’s total remuneration rose by 86.92% to US$896.62K. Moreover, Conte’s pay is also made up of 36.01% non-cash elements, which means that fluxes in JAGX’s share price can move the real level of what the CEO actually takes home at the end of the day.
Is JAGX overpaying the CEO?
Though there is no cookie-cutter approach, as remuneration should be tailored to the specific company and market, we can estimate a high-level base line to see if JAGX deviates substantially from its peers. This exercise can help shareholders ask the right question about Conte’s incentive alignment. Typically, a US small-cap has a value of $1B, generates earnings of $96M, and remunerates its CEO at roughly $2.7M per year. Normally I would look at market cap and earnings as a proxy for performance, however, JAGX’s negative earnings reduces the usefulness of my formula. Looking at the range of compensation for small-cap executives, it seems like Conte is remunerated sensibly relative to peers. On the whole, even though JAGX is loss-making, it seems like the CEO’s pay is sound.
Next Steps:
Hopefully this article has given you insight on how shareholders should think about JAGX’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. If you have not done so already, I urge you to complete your research by taking a look at the following:
Governance: To find out more about JAGX’s governance, look through our infographic report of the company’s board and management.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of JAGX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
