Is 88 Energy Limited (ASX:88E) Excessively Paying Its CEO?

In 2014 Dave Wall was appointed CEO of 88 Energy Limited (ASX:88E). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for 88 Energy

How Does Dave Wall's Compensation Compare With Similar Sized Companies?

Our data indicates that 88 Energy Limited is worth AU$171m, and total annual CEO compensation was reported as AU$550k for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at AU$400k. We took a group of companies with market capitalizations below AU$301m, and calculated the median CEO total compensation to be AU$379k.

It would therefore appear that 88 Energy Limited pays Dave Wall 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 get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at 88 Energy has changed from year to year.

Is 88 Energy Limited Growing?

Over the last three years 88 Energy Limited has shrunk its earnings per share by an average of 3.3% per year (measured with a line of best fit). In the last year, its revenue is up 206%.

Investors should note that, over three years, earnings per share are down. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has 88 Energy Limited Been A Good Investment?

With a three year total loss of 42%, 88 Energy Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

We compared total CEO remuneration at 88 Energy Limited with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

While we have not been overly impressed by the business performance, the shareholder returns, over three years, have been disappointing. Although we'd stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling 88 Energy (free visualization of insider trades).

If you want to buy a stock that is better than 88 Energy, 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.

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.