Mike Perry has been the CEO of Avita Medical Limited (ASX:AVH) since 2017. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
How Does Mike Perry’s Compensation Compare With Similar Sized Companies?
Our data indicates that Avita Medical Limited is worth AU$1.1b, and total annual CEO compensation was reported as AU$2.4m for the year to June 2019. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at AU$664k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We examined companies with market caps from AU$629m to AU$2.5b, and discovered that the median CEO total compensation of that group was AU$1.6m.
Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Avita Medical stands. On an industry level, roughly 63% of total compensation represents salary and 37% is other remuneration. It’s interesting to note that Avita Medical allocates a smaller portion of compensation to salary in comparison to the broader industry.
It would therefore appear that Avita Medical Limited pays Mike Perry 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, below, how CEO compensation at Avita Medical has changed over time.
Is Avita Medical Limited Growing?
On average over the last three years, Avita Medical Limited has shrunk earnings per share by 19% each year (measured with a line of best fit). In the last year, its revenue is up 550%.
Investors should note that, over three years, earnings per share are down. 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 Avita Medical Limited Been A Good Investment?
I think that the total shareholder return of 490%, over three years, would leave most Avita Medical Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
We compared the total CEO remuneration paid by Avita Medical 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.
One might like to have seen stronger growth, but shareholder returns have been pleasing, over the last three years. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. Looking into other areas, we’ve picked out 3 warning signs for Avita Medical that investors should think about before committing capital to this stock.
If you want to buy a stock that is better than Avita Medical, this free list of high return, low debt companies is a great place to look.
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