In 2014 Jostein Alendal was appointed CEO of Reach Subsea ASA (OB:REACH). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we’ll look at a snap shot of the business growth. 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.
How Does Jostein Alendal’s Compensation Compare With Similar Sized Companies?
Our data indicates that Reach Subsea ASA is worth kr129m, and total annual CEO compensation was reported as kr1.6m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at kr1.5m. We examined a group of similar sized companies, with market capitalizations of below kr2.1b. The median CEO total compensation in that group is kr4.0m.
Next, let’s break down remuneration compositions to understand how the industry and company compare with each other. Talking in terms of the sector, salary represented approximately 64% of total compensation out of all the companies we analysed, while other remuneration made up 36% of the pie. Reach Subsea is paying a higher share of its remuneration through a salary in comparison to the overall industry.
At first glance this seems like a real positive for shareholders, since Jostein Alendal is paid less than the average total compensation paid by similar sized companies. However, before we heap on the praise, we should delve deeper to understand business performance. The graphic below shows how CEO compensation at Reach Subsea has changed from year to year.
Is Reach Subsea ASA Growing?
On average over the last three years, Reach Subsea ASA has seen earnings per share (EPS) move in a favourable direction by 28% each year (using a line of best fit). In the last year, its revenue is down 25%.
This demonstrates that the company has been improving recently. A good result. Revenue growth is a real positive for growth, but ultimately profits are more important. We don’t have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Reach Subsea ASA Been A Good Investment?
Since shareholders would have lost about 51% over three years, some Reach Subsea ASA shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.
It looks like Reach Subsea ASA pays its CEO less than similar sized companies.
Many would consider this to indicate that the pay is modest since the business is growing. Few would deny that the total shareholder return over the last three years could have been a lot better. So while we don’t think, Jostein Alendal is paid too much, shareholders may hope that business performance translates to investment returns before pay rises are given out. When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. Shifting gears from CEO pay for a second, we’ve spotted 4 warning signs for Reach Subsea you should be aware of, and 1 of them is a bit unpleasant.
If you want to buy a stock that is better than Reach Subsea, 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 email@example.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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