Nicholas Pinchuk has been the CEO of Snap-on Incorporated (NYSE:SNA) since 2007, and this article will examine the executive’s compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing Snap-on Incorporated’s CEO Compensation With the industry
At the time of writing, our data shows that Snap-on Incorporated has a market capitalization of US$8.3b, and reported total annual CEO compensation of US$7.6m for the year to December 2019. Notably, that’s a decrease of 15% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.1m.
In comparison with other companies in the industry with market capitalizations ranging from US$4.0b to US$12b, the reported median CEO total compensation was US$7.0m. This suggests that Snap-on remunerates its CEO largely in line with the industry average. Moreover, Nicholas Pinchuk also holds US$82m worth of Snap-on stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 16% of total compensation represents salary, while the remainder of 84% is other remuneration. Snap-on is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If non-salary compensation dominates total pay, it’s an indicator that the executive’s salary is tied to company performance.
A Look at Snap-on Incorporated’s Growth Numbers
Snap-on Incorporated has seen its earnings per share (EPS) increase by 2.0% a year over the past three years. In the last year, its revenue is down 7.0%.
We would prefer it if there was revenue growth, but the modest EPSgrowth gives us some relief. It’s hard to reach a conclusion about business performance right now. This may be one to watch. Looking ahead, you might want to check this free visual report on analyst forecasts for the company’s future earnings..
Has Snap-on Incorporated Been A Good Investment?
With a total shareholder return of 12% over three years, Snap-on Incorporated shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
As we touched on above, Snap-on Incorporated is currently paying a compensation that’s close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. However, EPS and total shareholder return are solid yet uninspiring. So, although the CEO compensation seems reasonable, shareholders might want to see some further progress before they agree that Nicholas should get a raise.
CEO compensation can have a massive impact on performance, but it’s just one element. We’ve identified 1 warning sign for Snap-on that investors should be aware of in a dynamic business environment.
Important note: Snap-on is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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