Is Graham Corporation’s (NYSE:GHM) CEO Being Overpaid?

Jim Lines became the CEO of Graham Corporation (NYSE:GHM) in 2008. First, this article will compare CEO compensation with compensation at similar sized companies. 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. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Graham

How Does Jim Lines’s Compensation Compare With Similar Sized Companies?

Our data indicates that Graham Corporation is worth US$180m, and total annual CEO compensation is US$1.2m. (This figure is for the year to March 2019). That’s a modest increase of 4.2% on the prior year year. We think total compensation is more important but we note that the CEO salary is lower, at US$435k. We looked at a group of companies with market capitalizations from US$100m to US$400m, and the median CEO total compensation was US$1.2m.

So Jim Lines is paid around the average of the companies we looked at. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance.

You can see a visual representation of the CEO compensation at Graham, below.

NYSE:GHM CEO Compensation, September 5th 2019
NYSE:GHM CEO Compensation, September 5th 2019

Is Graham Corporation Growing?

Over the last three years Graham Corporation has shrunk its earnings per share by an average of 54% per year (measured with a line of best fit). In the last year, its revenue is down -3.9%.

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. These factors suggest that the business performance wouldn’t really justify a high pay packet for the CEO.

Has Graham Corporation Been A Good Investment?

Since shareholders would have lost about 2.8% over three years, some Graham Corporation shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

Jim Lines is paid around what is normal the leaders of comparable size companies.

After looking at EPS and total shareholder returns, it’s certainly hard to argue the company has performed well, since both metrics are down. Few would argue that it’s wise for the company to pay any more, before returns improve. So you may want to check if insiders are buying Graham shares with their own money (free access).

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

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.

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. Thank you for reading.