Tim James became the CEO of Ensurance Limited (ASX:ENA) in 2016, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Ensurance.
How Does Total Compensation For Tim James Compare With Other Companies In The Industry?
At the time of writing, our data shows that Ensurance Limited has a market capitalization of AU$10m, and reported total annual CEO compensation of AU$396k for the year to June 2020. Notably, that’s an increase of 16% over the year before. We note that the salary portion, which stands at AU$374.4k constitutes the majority of total compensation received by the CEO.
In comparison with other companies in the industry with market capitalizations under AU$278m, the reported median total CEO compensation was AU$430k. So it looks like Ensurance compensates Tim James in line with the median for the industry.
On an industry level, roughly 41% of total compensation represents salary and 59% is other remuneration. Ensurance is paying a higher share of its remuneration through a salary in comparison to the overall industry. If total compensation veers towards salary, it suggests that the variable portion – which is generally tied to performance, is lower.
Ensurance Limited’s Growth
Over the past three years, Ensurance Limited has seen its earnings per share (EPS) grow by 72% per year. It achieved revenue growth of 53% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Although we don’t have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Ensurance Limited Been A Good Investment?
With a three year total loss of 82% for the shareholders, Ensurance Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, Ensurance pays its CEO in line with similar-sized companies belonging to the same industry. At the same time, the company has logged negative shareholder returns over the last three years. But on the bright side, EPS growth is positive over the same period. Overall, we wouldn’t say Tim is paid an unjustified compensation, but shareholders might not favor a raise before shareholder returns show a positive trend.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company’s key performance areas. We identified 6 warning signs for Ensurance (5 make us uncomfortable!) that you should be aware of before investing here.
Switching gears from Ensurance, if you’re hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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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