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Should You Worry About Grafenia Plc's (LON:GRA) CEO Pay Cheque?

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Simply Wall St
·3 min read
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Peter Gunning is the CEO of Grafenia Plc (LON:GRA). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Grafenia

How Does Peter Gunning's Compensation Compare With Similar Sized Companies?

Our data indicates that Grafenia Plc is worth UK£7.1m, and total annual CEO compensation was reported as UK£187k for the year to March 2019. We think total compensation is more important but we note that the CEO salary is lower, at UK£171k. We took a group of companies with market capitalizations below UK£161m, and calculated the median CEO total compensation to be UK£266k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Grafenia stands. On an industry level, roughly 55% of total compensation represents salary and 45% is other remuneration. Grafenia is paying a higher share of its remuneration through a salary in comparison to the overall industry.

That means Peter Gunning receives fairly typical remuneration for the CEO of a company that size. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. You can see, below, how CEO compensation at Grafenia has changed over time.

AIM:GRA CEO Compensation April 29th 2020
AIM:GRA CEO Compensation April 29th 2020

Is Grafenia Plc Growing?

Grafenia Plc has reduced its earnings per share by an average of 46% a year, over the last three years (measured with a line of best fit). Revenue was pretty flat on last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. And the flat revenue hardly impresses. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Grafenia Plc Been A Good Investment?

Given the total loss of 14% over three years, many shareholders in Grafenia Plc 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...

Peter Gunning is paid around what is normal for the leaders of comparable size companies.

The company isn't growing EPS, and shareholder returns have been disappointing. Most would consider it prudent for the company to hold off any CEO pay rise until performance improves. Taking a breather from CEO compensation, we've spotted 6 warning signs for Grafenia (of which 3 are potentially serious!) you should know about in order to have a holistic understanding of the stock.

Important note: Grafenia 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.

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. Thank you for reading.