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Should You Worry About Profound Medical Corp.’s (TSE:PRN) CEO Pay?

In 2016 Arun Menawat was appointed CEO of Profound Medical Corp. (TSE:PRN). 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. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Profound Medical

How Does Arun Menawat’s Compensation Compare With Similar Sized Companies?

Our data indicates that Profound Medical Corp. is worth CA$86m, and total annual CEO compensation is CA$344k. (This figure is for the year to December 2017). Notably, the salary of CA$332k is the vast majority of the CEO compensation. We looked at a group of companies with market capitalizations under CA$269m, and the median CEO compensation was CA$145k.

As you can see, Arun Menawat is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Profound Medical Corp. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.

You can see, below, how CEO compensation at Profound Medical has changed over time.

TSX:PRN CEO Compensation, March 7th 2019
TSX:PRN CEO Compensation, March 7th 2019

Is Profound Medical Corp. Growing?

Over the last three years Profound Medical Corp. has grown its earnings per share (EPS) by an average of 44% per year (using a line of best fit). It saw its revenue drop -7.6% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. Revenue growth is a real positive for growth, but ultimately profits are more important. Shareholders might be interested in this free visualization of analyst forecasts.

Has Profound Medical Corp. Been A Good Investment?

Since shareholders would have lost about 25% over three years, some Profound Medical Corp. shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We compared total CEO remuneration at Profound Medical Corp. with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

However we must not forget that the EPS growth has been very strong over three years. However, the returns to investors are far less impressive, over the same period. Considering the per share profit growth, but keeping in mind the weak returns, we’d need more time to form a view on CEO compensation. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Profound Medical (free visualization of insider trades).

If you want to buy a stock that is better than Profound Medical, this free list of high return, low debt companies is a great place to look.

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.

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