Tim Naughton has been the CEO of AvalonBay Communities, Inc. (NYSE:AVB) since 2012. This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Tim Naughton’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that AvalonBay Communities, Inc. has a market cap of US$29b, and reported total annual CEO compensation of US$10m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.0m. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
So Tim Naughton is paid around the average of the companies we looked at. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance.
You can see a visual representation of the CEO compensation at AvalonBay Communities, below.
Is AvalonBay Communities, Inc. Growing?
AvalonBay Communities, Inc. has reduced its earnings per share by an average of 1.7% a year, over the last three years (measured with a line of best fit). Its revenue is up 2.0% over last year.
The lack of earnings per share growth in the last three years is unimpressive. And the modest revenue growth over 12 months isn’t much comfort against the reduced earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. It could be important to check this free visual depiction of what analysts expect for the future.
Has AvalonBay Communities, Inc. Been A Good Investment?
AvalonBay Communities, Inc. has generated a total shareholder return of 28% over three years, so most shareholders would be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.
Tim Naughton is paid around the same as most CEOs of large companies.
We feel that earnings per share have been a bit disappointing, but and we don’t think the total returns are amazing. We’re not saying the CEO pay is too generous, but it’s probably fair to say that many shareholders would like to see improved performance, before any pay rise occurs. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling AvalonBay Communities (free visualization of insider trades).
If you want to buy a stock that is better than AvalonBay Communities, 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 firstname.lastname@example.org. 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.