Does Fisher & Paykel Healthcare Corporation Limited’s (NZSE:FPH) CEO Pay Reflect Performance?

Lewis Gradon became the CEO of Fisher & Paykel Healthcare Corporation Limited (NZSE:FPH) in 2016. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. 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.

View our latest analysis for Fisher & Paykel Healthcare

How Does Lewis Gradon’s Compensation Compare With Similar Sized Companies?

According to our data, Fisher & Paykel Healthcare Corporation Limited has a market capitalization of NZ$13b, and paid its CEO total annual compensation worth NZ$2.7m over the year to March 2019. While we always look at total compensation first, we note that the salary component is less, at NZ$1.2m. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of NZ$6.0b to NZ$18b. The median total CEO compensation was NZ$1.8m.

Thus we can conclude that Lewis Gradon receives more in total compensation than the median of a group of companies in the same market, and of similar size to Fisher & Paykel Healthcare Corporation Limited. 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 Fisher & Paykel Healthcare has changed from year to year.

NZSE:FPH CEO Compensation, January 20th 2020
NZSE:FPH CEO Compensation, January 20th 2020

Is Fisher & Paykel Healthcare Corporation Limited Growing?

Over the last three years Fisher & Paykel Healthcare Corporation Limited has grown its earnings per share (EPS) by an average of 12% per year (using a line of best fit). Its revenue is up 9.3% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It’s also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.

Has Fisher & Paykel Healthcare Corporation Limited Been A Good Investment?

Boasting a total shareholder return of 163% over three years, Fisher & Paykel Healthcare Corporation Limited 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.

In Summary…

We examined the amount Fisher & Paykel Healthcare Corporation Limited pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

However, the earnings per share growth over three years is certainly impressive. In addition, shareholders have done well over the same time period. So, considering this good performance, the CEO compensation may be quite appropriate. So you may want to check if insiders are buying Fisher & Paykel Healthcare shares with their own money (free access).

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 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.

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