A Quick Analysis On SM Energy’s (NYSE:SM) CEO Compensation

This article will reflect on the compensation paid to Jay Ottoson who has served as CEO of SM Energy Company (NYSE:SM) since 2015. This analysis will also assess whether SM Energy pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

See our latest analysis for SM Energy

Comparing SM Energy Company’s CEO Compensation With the industry

Our data indicates that SM Energy Company has a market capitalization of US$390m, and total annual CEO compensation was reported as US$6.0m for the year to December 2019. We note that’s a decrease of 14% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$873k.

On examining similar-sized companies in the industry with market capitalizations between US$200m and US$800m, we discovered that the median CEO total compensation of that group was US$4.1m. Hence, we can conclude that Jay Ottoson is remunerated higher than the industry median. What’s more, Jay Ottoson holds US$1.3m worth of shares in the company in their own name.

Component20192018Proportion (2019)
Salary US$873k US$846k 15%
Other US$5.1m US$6.1m 85%
Total CompensationUS$6.0m US$7.0m100%

On an industry level, around 19% of total compensation represents salary and 81% is other remuneration. It’s interesting to note that SM Energy allocates a smaller portion of compensation to salary in comparison to the broader industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.

NYSE:SM CEO Compensation July 21st 2020

A Look at SM Energy Company’s Growth Numbers

SM Energy Company’s earnings per share (EPS) grew 35% per year over the last three years. Revenue was pretty flat on last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s nice to see revenue heading northwards, as this is consistent with healthy business conditions. Looking ahead, you might want to check this free visual report on analyst forecasts for the company’s future earnings..

Has SM Energy Company Been A Good Investment?

Since shareholders would have lost about 80% over three years, some SM Energy Company investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude…

As previously discussed, Jay is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. However, the earnings per share growth is certainly impressive, but shareholder returns — over the same period — have been disappointing. Although we don’t think the CEO pay is too high, considering negative investor returns, it is more generous than modest.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That’s why we did some digging and identified 2 warning signs for SM Energy that you should be aware of before investing.

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.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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