Jeffrey Leiden has been the CEO of Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) since 2012. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Then we'll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Jeffrey Leiden's Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Vertex Pharmaceuticals Incorporated has a market cap of US$48b, and is paying total annual CEO compensation of US$19m. (This is based on the year to December 2018). While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$1.3m. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Thus we can conclude that Jeffrey Leiden receives more in total compensation than the median of a group of large companies in the same market as Vertex Pharmaceuticals Incorporated. However, this doesn't necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Vertex Pharmaceuticals has changed from year to year.
Is Vertex Pharmaceuticals Incorporated Growing?
Vertex Pharmaceuticals Incorporated has increased its earnings per share (EPS) by an average of 115% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 32%.
This shows that the company has improved itself over the last few years. Good news for shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Shareholders might be interested in this free visualization of analyst forecasts.
Has Vertex Pharmaceuticals Incorporated Been A Good Investment?
I think that the total shareholder return of 93%, over three years, would leave most Vertex Pharmaceuticals Incorporated shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
We compared total CEO remuneration at Vertex Pharmaceuticals Incorporated with the amount paid at other large companies. As discussed above, we discovered that the company pays more than the median of that group.
However, the earnings per share growth over three years is certainly impressive. Even better, returns to shareholders have been plentiful, over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Vertex Pharmaceuticals (free visualization of insider trades).
If you want to buy a stock that is better than Vertex Pharmaceuticals, this free list of high return, low debt companies is a great place to look.
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If you spot an error that warrants correction, please contact the editor at email@example.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.