Is e.l.f. Beauty, Inc.’s (NYSE:ELF) CEO Being Overpaid?

Tarang Amin became the CEO of e.l.f. Beauty, Inc. (NYSE:ELF) in 2014. 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. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for e.l.f. Beauty

How Does Tarang Amin’s Compensation Compare With Similar Sized Companies?

Our data indicates that e.l.f. Beauty, Inc. is worth US$516m, and total annual CEO compensation was reported as US$7.5m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at US$475k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We looked at a group of companies with market capitalizations from US$200m to US$800m, and the median CEO total compensation was US$2.1m.

Pay mix tells us a lot about how a company functions versus the wider industry, and it’s no different in the case of e.l.f. Beauty. Speaking on an industry level, we can see that nearly 65% of total compensation represents salary, while the remainder of 35% is other remuneration. e.l.f. Beauty sets aside a smaller share of compensation for salary, in comparison to the overall industry.

As you can see, Tarang Amin is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean e.l.f. Beauty, Inc. is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business. You can see a visual representation of the CEO compensation at e.l.f. Beauty, below.

NYSE:ELF CEO Compensation March 28th 2020
NYSE:ELF CEO Compensation March 28th 2020

Is e.l.f. Beauty, Inc. Growing?

On average over the last three years, e.l.f. Beauty, Inc. has seen earnings per share (EPS) move in a favourable direction by 127% each year (using a line of best fit). It achieved revenue growth of 1.4% over the last year.

This demonstrates that the company has been improving recently. A good result. It’s nice to see a little revenue growth, as this is consistent with healthy business conditions. You might want to check this free visual report on analyst forecasts for future earnings.

Has e.l.f. Beauty, Inc. Been A Good Investment?

Given the total loss of 64% over three years, many shareholders in e.l.f. Beauty, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

We compared total CEO remuneration at e.l.f. Beauty, Inc. with the amount paid at companies with a similar market capitalization. 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. On the other hand returns to investors over the same period have probably disappointed many. Considering positive per-share earnings movement, but keeping in mind the weak returns, we’d need more time to form a view on CEO compensation. Shifting gears from CEO pay for a second, we’ve picked out 2 warning signs for e.l.f. Beauty that investors should be aware of in a dynamic business environment.

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.

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.

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