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Should You Worry About 88 Energy Limited's (ASX:88E) CEO Pay Cheque?

Simply Wall St

Dave Wall has been the CEO of 88 Energy Limited (ASX:88E) since 2014. 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. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for 88 Energy

How Does Dave Wall's Compensation Compare With Similar Sized Companies?

Our data indicates that 88 Energy Limited is worth AU$156m, and total annual CEO compensation was reported as AU$550k for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$400k. We took a group of companies with market capitalizations below AU$300m, and calculated the median CEO total compensation to be AU$380k.

Thus we can conclude that Dave Wall receives more in total compensation than the median of a group of companies in the same market, and of similar size to 88 Energy Limited. However, this doesn't necessarily mean the pay 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 88 Energy, below.

ASX:88E CEO Compensation, February 9th 2020

Is 88 Energy Limited Growing?

88 Energy Limited has reduced its earnings per share by an average of 3.3% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 206% over the last year.

The reduction in earnings per share, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. These two metric are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has 88 Energy Limited Been A Good Investment?

With a three year total loss of 43%, 88 Energy Limited would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We examined the amount 88 Energy Limited pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

Over the last three years, shareholder returns have been downright disappointing, and the underlying business has failed to impress us. Shareholders may wish to consider further research. Although we don't think the CEO pay is too high, it is probably more on the generous side of things. So you may want to check if insiders are buying 88 Energy shares with their own money (free access).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

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. Thank you for reading.