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Should You Worry About Lumentum Holdings Inc.’s (NASDAQ:LITE) CEO Pay?

Blake Harford

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Alan Lowe has been the CEO of Lumentum Holdings Inc. (NASDAQ:LITE) since 2015. 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Lumentum Holdings

How Does Alan Lowe’s Compensation Compare With Similar Sized Companies?

Our data indicates that Lumentum Holdings Inc. is worth US$3.6b, and total annual CEO compensation is US$6.8m. (This figure is for the year to 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$735k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$2.0b to US$6.4b. The median total CEO compensation was US$4.7m.

Thus we can conclude that Alan Lowe receives more in total compensation than the median of a group of companies in the same market, and of similar size to Lumentum Holdings Inc.. However, this doesn’t necessarily mean the pay is too high. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

You can see a visual representation of the CEO compensation at Lumentum Holdings, below.

NasdaqGS:LITE CEO Compensation, February 19th 2019

Is Lumentum Holdings Inc. Growing?

Lumentum Holdings Inc. has increased its earnings per share (EPS) by an average of 91% a year, over the last three years (using a line of best fit). It achieved revenue growth of 18% over the last year.

This demonstrates that the company has been improving recently. A good result. It’s also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. You might want to check this free visual report on analyst forecasts for future earnings.

Has Lumentum Holdings Inc. Been A Good Investment?

I think that the total shareholder return of 93%, over three years, would leave most Lumentum Holdings Inc. shareholders smiling. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

We compared total CEO remuneration at Lumentum Holdings Inc. with the amount paid at companies with a similar market capitalization. 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. Even better, returns to shareholders have been plentiful, over the same time period. Considering this fine result for shareholders, we daresay the CEO compensation might be apt. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Lumentum Holdings (free visualization of insider trades).

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. On rare occasion, data errors may occur. Thank you for reading.