In 2017 Xiaochun Wang was appointed CEO of China Traditional Chinese Medicine Holdings Co. Limited (HKG:570). First, this article will compare CEO compensation with compensation at similar sized companies. Next, we'll consider growth that the business demonstrates. 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.
How Does Xiaochun Wang's Compensation Compare With Similar Sized Companies?
Our data indicates that China Traditional Chinese Medicine Holdings Co. Limited is worth HK$18b, and total annual CEO compensation was reported as CN¥2.2m for the year to December 2018. Notably, the salary of CN¥2.1m is the vast majority of the CEO compensation. When we examined a selection of companies with market caps ranging from CN¥7.1b to CN¥23b, we found the median CEO total compensation was CN¥3.2m.
Most shareholders would consider it a positive that Xiaochun Wang takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. Though positive, it's important we delve into the performance of the actual business.
The graphic below shows how CEO compensation at China Traditional Chinese Medicine Holdings has changed from year to year.
Is China Traditional Chinese Medicine Holdings Co. Limited Growing?
Over the last three years China Traditional Chinese Medicine Holdings Co. Limited has grown its earnings per share (EPS) by an average of 16% per year (using a line of best fit). Its revenue is up 29% over last year.
This shows that the company has improved itself over the last few years. Good news for shareholders. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. Shareholders might be interested in this free visualization of analyst forecasts.
Has China Traditional Chinese Medicine Holdings Co. Limited Been A Good Investment?
With a three year total loss of 9.2%, China Traditional Chinese Medicine Holdings Co. Limited would certainly have some dissatisfied shareholders. It therefore might be upsetting for shareholders if the CEO were paid generously.
It appears that China Traditional Chinese Medicine Holdings Co. Limited remunerates its CEO below most similar sized companies.
Considering the underlying business is growing earnings, this would suggest the pay is modest. Unfortunately, some shareholders may be disappointed with their returns, given the company's performance over the last three years. We're not critical of the remuneration Xiaochun Wang receives, but it would be good to see improved returns to shareholders before the remuneration grows too much. In this case we may want to look deeper into the company. There are some real positives and we could see improved returns in the longer term. So you may want to check if insiders are buying China Traditional Chinese Medicine Holdings shares with their own money (free access).
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.
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