Does Terra Firma Capital Corporation’s (CVE:TII) CEO Pay Reflect Performance?

In 2016 Glenn Watchorn was appointed CEO of Terra Firma Capital Corporation (CVE:TII). First, this article will compare CEO compensation with compensation at similar sized companies. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

See our latest analysis for Terra Firma Capital

How Does Glenn Watchorn’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Terra Firma Capital Corporation has a market cap of CA$30m, and reported total annual CEO compensation of CA$598k for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at CA$398k. We took a group of companies with market capitalizations below CA$277m, and calculated the median CEO total compensation to be CA$222k.

As you can see, Glenn Watchorn is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Terra Firma Capital Corporation is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Terra Firma Capital has changed from year to year.

TSXV:TII CEO Compensation, March 13th 2020
TSXV:TII CEO Compensation, March 13th 2020

Is Terra Firma Capital Corporation Growing?

Over the last three years Terra Firma Capital Corporation has grown its earnings per share (EPS) by an average of 29% per year (using a line of best fit). It achieved revenue growth of 694% over the last year.

This demonstrates that the company has been improving recently. A good result. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. It could be important to check this free visual depiction of what analysts expect for the future.

Has Terra Firma Capital Corporation Been A Good Investment?

Since shareholders would have lost about 31% over three years, some Terra Firma Capital Corporation shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

We compared the total CEO remuneration paid by Terra Firma Capital Corporation, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. While EPS is positive, we’d say shareholders would want better returns before the CEO is paid much more. Taking a breather from CEO compensation, we’ve spotted 5 warning signs for Terra Firma Capital (of which 1 doesn’t sit too well with us!) you should know about in order to have a holistic understanding of the stock.

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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