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Should You Worry About Australian Pharmaceutical Industries Limited's (ASX:API) CEO Pay Cheque?

Simply Wall St

Richard Vincent has been the CEO of Australian Pharmaceutical Industries Limited (ASX:API) since 2017. 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.

See our latest analysis for Australian Pharmaceutical Industries

How Does Richard Vincent's Compensation Compare With Similar Sized Companies?

Our data indicates that Australian Pharmaceutical Industries Limited is worth AU$672m, and total annual CEO compensation is AU$1.2m. (This is based on the year to August 2018). We think total compensation is more important but we note that the CEO salary is lower, at AU$1.0m. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of AU$291m to AU$1.2b. The median total CEO compensation was AU$1.1m.

So Richard Vincent is paid around the average of the companies we looked at. This doesn't tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

You can see a visual representation of the CEO compensation at Australian Pharmaceutical Industries, below.

ASX:API CEO Compensation, September 17th 2019

Is Australian Pharmaceutical Industries Limited Growing?

Over the last three years Australian Pharmaceutical Industries Limited has shrunk its earnings per share by an average of 2.3% per year (measured with a line of best fit). It saw its revenue drop -1.5% over the last year.

The lack of earnings per share growth in the last three years is unimpressive. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.

Has Australian Pharmaceutical Industries Limited Been A Good Investment?

Given the total loss of 17% over three years, many shareholders in Australian Pharmaceutical Industries Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Richard Vincent is paid around what is normal the leaders of comparable size companies.

After looking at EPS and total shareholder returns, it's certainly hard to argue the company has performed well, since both metrics are down. Suffice it to say, we don't think the CEO is underpaid! If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Australian Pharmaceutical Industries.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity 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.