Is NETGEAR, Inc.’s (NASDAQ:NTGR) CEO Being Overpaid?

Patrick Lo became the CEO of NETGEAR, Inc. (NASDAQ:NTGR) in 2002. 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 we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for NETGEAR

How Does Patrick Lo’s Compensation Compare With Similar Sized Companies?

According to our data, NETGEAR, Inc. has a market capitalization of US$1.1b, and pays its CEO total annual compensation worth US$7.1m. (This number is for the twelve months until December 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$895k. When we examined a selection of companies with market caps ranging from US$400m to US$1.6b, we found the median CEO total compensation was US$2.7m.

It would therefore appear that NETGEAR, Inc. pays Patrick Lo 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. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see, below, how CEO compensation at NETGEAR has changed over time.

NasdaqGS:NTGR CEO Compensation, September 5th 2019
NasdaqGS:NTGR CEO Compensation, September 5th 2019

Is NETGEAR, Inc. Growing?

NETGEAR, Inc. has reduced its earnings per share by an average of 61% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is up 17%.

Unfortunately, earnings per share have trended lower over the last three years. And while it’s good to see some good revenue growth recently, the growth isn’t really fast enough for me to put aside my concerns around earnings. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.

Has NETGEAR, Inc. Been A Good Investment?

Since shareholders would have lost about 5.1% over three years, some NETGEAR, Inc. shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

We compared the total CEO remuneration paid by NETGEAR, Inc., and compared it to remuneration at a group of similar sized companies. Our data suggests that it pays above the median CEO pay within that group.

We think many shareholders would be underwhelmed with the business growth over the last three years. Just as bad, share price gains for investors have failed to materialize, over the same period. In our opinion the CEO might be paid too generously! Shareholders may want to check for free if NETGEAR insiders are buying or selling shares.

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.