Davuluri Rao became the CEO of Neuland Laboratories Limited (NSE:NEULANDLAB) in 2013. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. 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.
How Does Davuluri Rao’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Neuland Laboratories Limited has a market cap of ₹5.9b, and is paying total annual CEO compensation of ₹13m. (This figure is for the year to March 2019). That’s a notable increase of 150% on last year. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at ₹9.8m. We took a group of companies with market capitalizations below ₹14b, and calculated the median CEO total compensation to be ₹1.5m.
It would therefore appear that Neuland Laboratories Limited pays Davuluri Rao 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 better assess whether the pay is overly generous by looking into the underlying business performance.
You can see a visual representation of the CEO compensation at Neuland Laboratories, below.
Is Neuland Laboratories Limited Growing?
On average over the last three years, Neuland Laboratories Limited has shrunk earnings per share by 35% each year (measured with a line of best fit). Its revenue is up 26% over last year.
The reduction in earnings per share, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. It’s hard to reach a conclusion about business performance right now. This may be one to watch.
Has Neuland Laboratories Limited Been A Good Investment?
Since shareholders would have lost about 49% over three years, some Neuland Laboratories Limited shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
We compared the total CEO remuneration paid by Neuland Laboratories 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.
The growth in the business has been uninspiring, but the shareholder returns have arguably been worse, over the last three years. This contrasts with the growth in CEO remuneration, in the last year. Although we’d stop short of calling it inappropriate, we think the CEO compensation is probably more on the generous side of things. So you may want to check if insiders are buying Neuland Laboratories shares with their own money (free access).
Important note: Neuland Laboratories may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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