Is Wayfair Inc. (NYSE:W) Overpaying Its CEO?

In 2002 Niraj Shah was appointed CEO of Wayfair Inc. (NYSE:W). This analysis aims first to contrast CEO compensation with other large companies. Then we’ll look at a snap shot of the business growth. 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.

See our latest analysis for Wayfair

How Does Niraj Shah’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Wayfair Inc. has a market cap of US$9.9b, and reported total annual CEO compensation of US$83k for the year to December 2018. Notably, the salary of US$80k is the vast majority of the CEO compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

Most shareholders would consider it a positive that Niraj Shah takes less in total compensation than the CEOs of most other large companies, leaving more for shareholders. Though positive, it’s important we delve into the performance of the actual business.

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

NYSE:W CEO Compensation, January 16th 2020
NYSE:W CEO Compensation, January 16th 2020

Is Wayfair Inc. Growing?

Wayfair Inc. 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 up 39%.

The reduction in earnings per share, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can’t form a strong opinion about business performance yet; but it’s one worth watching. Shareholders might be interested in this free visualization of analyst forecasts.

Has Wayfair Inc. Been A Good Investment?

Most shareholders would probably be pleased with Wayfair Inc. for providing a total return of 164% 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…

It looks like Wayfair Inc. pays its CEO less than the average at large companies.

It’s well worth noting that while Niraj Shah is paid below what is normal at large companies, the returns have been very pleasing, over the last three years. We would like to see EPS growth, but in our view it seems the CEO is modestly remunerated. So you may want to check if insiders are buying Wayfair shares with their own money (free access).

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