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Why NVE's (NASDAQ:NVEC) CEO Pay Matters

Simply Wall St
·3 min read

This article will reflect on the compensation paid to Daniel Baker who has served as CEO of NVE Corporation (NASDAQ:NVEC) since 2001. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for NVE

How Does Total Compensation For Daniel Baker Compare With Other Companies In The Industry?

Our data indicates that NVE Corporation has a market capitalization of US$269m, and total annual CEO compensation was reported as US$450k for the year to March 2020. We note that's an increase of 13% above last year. In particular, the salary of US$358.8k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations ranging from US$100m to US$400m, the reported median CEO total compensation was US$843k. That is to say, Daniel Baker is paid under the industry median. What's more, Daniel Baker holds US$4.5m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component

2020

2019

Proportion (2020)

Salary

US$359k

US$345k

80%

Other

US$91k

US$53k

20%

Total Compensation

US$450k

US$398k

100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. NVE pays out 80% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ceo-compensation

NVE Corporation's Growth

Over the last three years, NVE Corporation has shrunk its earnings per share by 3.3% per year. Its revenue is down 12% over the previous year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has NVE Corporation Been A Good Investment?

Since shareholders would have lost about 24% over three years, some NVE Corporation investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we touched on above, NVE Corporation is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. While we are quite underwhelmed with EPS growth, the shareholder returns over the past three years have also failed to impress us. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for NVE that you should be aware of before investing.

Switching gears from NVE, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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