In 2016 Gus Vlak was appointed CEO of The Eastern Company (NASDAQ:EML). 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 Gus Vlak’s Compensation Compare With Similar Sized Companies?
Our data indicates that The Eastern Company is worth US$140m, and total annual CEO compensation is US$1.2m. (This number is for the twelve months until December 2018). While we always look at total compensation first, we note that the salary component is less, at US$450k. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$493k.
Thus we can conclude that Gus Vlak receives more in total compensation than the median of a group of companies in the same market, and of similar size to The Eastern Company. However, this doesn’t necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
The graphic below shows how CEO compensation at Eastern has changed from year to year.
Is The Eastern Company Growing?
Over the last three years The Eastern Company has grown its earnings per share (EPS) by an average of 23% per year (using a line of best fit). Its revenue is up 2.5% over last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s nice to see a little revenue growth, as this is consistent with healthy business conditions.
Has The Eastern Company Been A Good Investment?
With a total shareholder return of 25% over three years, The Eastern Company shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
We compared the total CEO remuneration paid by The Eastern Company, 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.
Importantly, though, the company has impressed with its earnings per share growth, over three years. We also think investors are doing ok, over the same time period. While it may be worth researching further, we don’t see a problem with the CEO pay, given the good EPS growth. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Eastern (free visualization of insider trades).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
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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. Thank you for reading.