Is Avita Medical Limited (ASX:AVH) Excessively Paying Its CEO?

In 2017 Mike Perry was appointed CEO of Avita Medical Limited (ASX:AVH). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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 method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Avita Medical

How Does Mike Perry’s Compensation Compare With Similar Sized Companies?

According to our data, Avita Medical Limited has a market capitalization of AU$1.4b, and paid its CEO total annual compensation worth AU$2.4m over the year to June 2019. While we always look at total compensation first, we note that the salary component is less, at AU$664k. We further remind readers that the CEO may face performance requirements to receive the non-salary part of the total compensation. We examined companies with market caps from AU$575m to AU$2.3b, and discovered that the median CEO total compensation of that group was AU$1.4m.

As you can see, Mike Perry is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean Avita Medical Limited is paying too much. 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 Avita Medical, below.

ASX:AVH CEO Compensation, January 5th 2020
ASX:AVH CEO Compensation, January 5th 2020

Is Avita Medical Limited Growing?

Avita Medical Limited has reduced its earnings per share by an average of 11% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 543% over the last year.

As investors, we are a bit wary of companies that have lower earnings per share, over three years. On the other hand, the strong revenue growth suggests the business is growing. 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. Shareholders might be interested in this free visualization of analyst forecasts.

Has Avita Medical Limited Been A Good Investment?

Most shareholders would probably be pleased with Avita Medical Limited for providing a total return of 583% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary…

We compared total CEO remuneration at Avita Medical 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 generally prefer to see stronger EPS growth, there’s no arguing with the strong returns to shareholders, over the last three years. Considering this fine result for investors, we daresay the CEO compensation might be apt. Whatever your view on compensation, you might want to check if insiders are buying or selling Avita Medical shares (free trial).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.