Should You Worry About Alara Resources Limited's (ASX:AUQ) CEO Pay Cheque?
In 2015 Justin Richard was appointed CEO of Alara Resources Limited (ASX:AUQ). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
View our latest analysis for Alara Resources
How Does Justin Richard's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Alara Resources Limited has a market cap of AU$11m, and reported total annual CEO compensation of AU$570k for the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$374k. We took a group of companies with market capitalizations below AU$299m, and calculated the median CEO total compensation to be AU$381k.
As you can see, Justin Richard is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Alara Resources Limited is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Alara Resources has changed from year to year.
Is Alara Resources Limited Growing?
Over the last three years Alara Resources Limited has grown its earnings per share (EPS) by an average of 136% per year (using a line of best fit). Its revenue is up 882% over 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. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Alara Resources Limited Been A Good Investment?
With a three year total loss of 5.6%, Alara Resources 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 compared the total CEO remuneration paid by Alara Resources Limited, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
Importantly, though, the company has impressed with its earnings per share growth, over three years. 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 Alara Resources shares with their own money (free access).
Important note: Alara Resources 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.
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.
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