Is Cogstate Limited’s (ASX:CGS) CEO Pay Fair?

Brad O’Connor has been the CEO of Cogstate Limited (ASX:CGS) since 2005. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we’ll consider growth that the business demonstrates. 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.

See our latest analysis for Cogstate

How Does Brad O’Connor’s Compensation Compare With Similar Sized Companies?

According to our data, Cogstate Limited has a market capitalization of AU$56m, and paid its CEO total annual compensation worth US$655k over the year to June 2019. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$368k. We took a group of companies with market capitalizations below US$200m, and calculated the median CEO total compensation to be US$251k.

Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Cogstate stands. Speaking on an industry level, we can see that nearly 70% of total compensation represents salary, while the remainder of 30% is other remuneration. So it seems like there isn’t a significant difference between Cogstate and the broader market, in terms of salary allocation in the overall compensation package.

It would therefore appear that Cogstate Limited pays Brad O’Connor 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. You can see, below, how CEO compensation at Cogstate has changed over time.

ASX:CGS CEO Compensation May 3rd 2020
ASX:CGS CEO Compensation May 3rd 2020

Is Cogstate Limited Growing?

Cogstate Limited has reduced its earnings per share by an average of 51% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is down 24%.

Sadly for shareholders, earnings per share are actually down, over three years. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don’t have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Cogstate Limited Been A Good Investment?

Since shareholders would have lost about 61% over three years, some Cogstate Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We compared the total CEO remuneration paid by Cogstate Limited, and compared it to remuneration at a group of similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

We think many shareholders would be underwhelmed with the business growth over the last three years. Arguably worse, investors are without a positive return for the last three years. Some might well form the view that the CEO is paid too generously! Taking a breather from CEO compensation, we’ve spotted 5 warning signs for Cogstate (of which 1 is concerning!) you should know about in order to have a holistic understanding of the stock.

If you want to buy a stock that is better than Cogstate, 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 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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