Should You Worry About adidas AG's (FRA:ADS) CEO Pay Cheque?
In 2016 Kasper Rorsted was appointed CEO of adidas AG (FRA:ADS). First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. 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.
Check out our latest analysis for adidas
How Does Kasper Rorsted's Compensation Compare With Similar Sized Companies?
According to our data, adidas AG has a market capitalization of €57b, and pays its CEO total annual compensation worth €6.8m. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at €2.0m. When we examined a group of companies with market caps over €7.2b, we found that their median CEO total compensation was €4.3m. Once you start looking at very large companies, you need to take a broader range, because there simply aren't that many of them.
Thus we can conclude that Kasper Rorsted receives more in total compensation than the median of a group of large companies in the same market as adidas AG. 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, below, how CEO compensation at adidas has changed over time.
Is adidas AG Growing?
On average over the last three years, adidas AG has grown earnings per share (EPS) by 23% each year (using a line of best fit). Its revenue is up 4.4% over last year.
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 adidas AG Been A Good Investment?
Most shareholders would probably be pleased with adidas AG for providing a total return of 109% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
We compared the total CEO remuneration paid by adidas AG, and compared it to remuneration at a group of other large companies. As discussed above, we discovered that the company pays more than the median of that group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. In addition, shareholders have done well over the same time period. As a result of this good performance, the CEO remuneration may well be quite reasonable. Shareholders may want to check for free if adidas insiders are buying or selling shares.
Important note: adidas 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 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. Thank you for reading.
