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Should You Worry About Akebia Therapeutics, Inc.'s (NASDAQ:AKBA) CEO Pay Cheque?

Simply Wall St

John Butler became the CEO of Akebia Therapeutics, Inc. (NASDAQ:AKBA) in 2013. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Akebia Therapeutics

How Does John Butler's Compensation Compare With Similar Sized Companies?

Our data indicates that Akebia Therapeutics, Inc. is worth US$447m, and total annual CEO compensation was reported as US$3.5m for the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$595k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$200m to US$800m. The median total CEO compensation was US$1.9m.

It would therefore appear that Akebia Therapeutics, Inc. pays John Butler 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. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Akebia Therapeutics has changed from year to year.

NasdaqGM:AKBA CEO Compensation, October 2nd 2019
NasdaqGM:AKBA CEO Compensation, October 2nd 2019

Is Akebia Therapeutics, Inc. Growing?

Over the last three years Akebia Therapeutics, Inc. has grown its earnings per share (EPS) by an average of 23% per year (using a line of best fit). It achieved revenue growth of 26% over the last year.

This demonstrates that the company has been improving recently. A good result. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. It could be important to check this free visual depiction of what analysts expect for the future.

Has Akebia Therapeutics, Inc. Been A Good Investment?

Given the total loss of 58% over three years, many shareholders in Akebia Therapeutics, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We examined the amount Akebia Therapeutics, Inc. pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of 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. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. So you may want to check if insiders are buying Akebia Therapeutics shares with their own money (free access).

Important note: Akebia Therapeutics 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.

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.

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.