In 2015 Chris Franklin was appointed CEO of Essential Utilities, Inc. (NYSE:WTRG). 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. This method should give us information to assess how appropriately the company pays the CEO.
How Does Chris Franklin’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Essential Utilities, Inc. has a market cap of US$9.8b, and reported total annual CEO compensation of US$3.6m for the year to December 2018. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$749k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
Most shareholders would consider it a positive that Chris Franklin takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. While this is a good thing, you’ll need to understand the business better before you can form an opinion.
The graphic below shows how CEO compensation at Essential Utilities has changed from year to year.
Is Essential Utilities, Inc. Growing?
On average over the last three years, Essential Utilities, Inc. has shrunk earnings per share by 15% each year (measured with a line of best fit). In the last year, its revenue is up 6.2%.
Sadly for shareholders, earnings per share are actually down, over three years. And the modest revenue growth over 12 months isn’t much comfort against the reduced earnings per share. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.
Has Essential Utilities, Inc. Been A Good Investment?
Boasting a total shareholder return of 52% over three years, Essential Utilities, Inc. has done well by shareholders. 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.
It looks like Essential Utilities, Inc. pays its CEO less than the average at large companies.
Chris Franklin receives relatively low remuneration compared to most large companies. And while the company isn’t growing earnings per share, total returns have been pleasing. We would like to see EPS growth, but in our view it seems the CEO is remunerated reasonably. CEO compensation is an important area to keep your eyes on, but we’ve also identified 2 warning signs for Essential Utilities (1 is a bit concerning!) that you should be aware of before investing here.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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