In 2010 Doug Yearley was appointed CEO of Toll Brothers, Inc. (NYSE:TOL). 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.
How Does Doug Yearley's Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Toll Brothers, Inc. has a market cap of US$5.6b, and reported total annual CEO compensation of US$10.0m for the year to October 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$1.0m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from US$4.0b to US$12b, and the median CEO total compensation was US$6.8m.
As you can see, Doug Yearley is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Toll Brothers, Inc. is paying too much. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at Toll Brothers, below.
Is Toll Brothers, Inc. Growing?
Toll Brothers, Inc. has increased its earnings per share (EPS) by an average of 30% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 8.7%.
This demonstrates that the company has been improving recently. A good result. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.
Has Toll Brothers, Inc. Been A Good Investment?
Most shareholders would probably be pleased with Toll Brothers, Inc. for providing a total return of 45% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared total CEO remuneration at Toll Brothers, Inc. 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. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Toll Brothers.
Important note: Toll Brothers 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.
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