In 2001 Douglas Starrett was appointed CEO of The L.S. Starrett Company (NYSE:SCX). 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Douglas Starrett's Compensation Compare With Similar Sized Companies?
Our data indicates that The L.S. Starrett Company is worth US$50m, and total annual CEO compensation is US$641k. (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$425k. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$434k.
It would therefore appear that The L.S. Starrett Company pays Douglas Starrett more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at L.S. Starrett, below.
Is The L.S. Starrett Company Growing?
On average over the last three years, The L.S. Starrett Company has grown earnings per share (EPS) by 32% each year (using a line of best fit). In the last year, its revenue is up 5.7%.
This demonstrates that the company has been improving recently. A good result. It's also good to see modest revenue growth, suggesting the underlying business is healthy. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has The L.S. Starrett Company Been A Good Investment?
With a three year total loss of 25%, The L.S. Starrett Company would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
We compared the total CEO remuneration paid by The L.S. Starrett Company, and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.
However, the earnings per share growth over three years is certainly impressive. However, the returns to investors are far less impressive, over the same period. While EPS is positive, we'd say shareholders would want better returns before the CEO is paid much more. Whatever your view on compensation, you might want to check if insiders are buying or selling L.S. Starrett shares (free trial).
Important note: L.S. Starrett 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.
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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. Thank you for reading.