How Should Investors React To Argonaut Gold Inc.’s (TSE:AR) CEO Pay?

Pete Dougherty became the CEO of Argonaut Gold Inc. (TSE:AR) in 2009. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Argonaut Gold

How Does Pete Dougherty’s Compensation Compare With Similar Sized Companies?

According to our data, Argonaut Gold Inc. has a market capitalization of CA$201m, and paid its CEO total annual compensation worth US$1.5m over the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$395k. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$155k.

Pay mix tells us a lot about how a company functions versus the wider industry, and it’s no different in the case of Argonaut Gold. Talking in terms of the sector, salary represented approximately 92% of total compensation out of all the companies we analysed, while other remuneration made up 7.6% of the pie. Readers will want to know that Argonaut Gold pays a modest slice of remuneration through salary, as compared to the wider sector.

It would therefore appear that Argonaut Gold Inc. pays Pete Dougherty more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see a visual representation of the CEO compensation at Argonaut Gold, below.

TSX:AR CEO Compensation, March 19th 2020
TSX:AR CEO Compensation, March 19th 2020

Is Argonaut Gold Inc. Growing?

Argonaut Gold Inc. has reduced its earnings per share by an average of 103% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is up 37%.

Investors should note that, over three years, earnings per share are down. But in contrast the revenue growth is strong, suggesting future potential for earnings growth. These two metric are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. You might want to check this free visual report on analyst forecasts for future earnings.

Has Argonaut Gold Inc. Been A Good Investment?

Since shareholders would have lost about 52% over three years, some Argonaut Gold Inc. 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 Argonaut Gold Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

The growth in the business has been uninspiring, but the shareholder returns have arguably been worse, over the last three years. Although we’d stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. Shifting gears from CEO pay for a second, we’ve picked out 1 warning sign for Argonaut Gold that investors should be aware of in a dynamic business environment.

If you want to buy a stock that is better than Argonaut Gold, this free list of high return, low debt companies is a great place to look.

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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