In 1996, Alvin Murstein was appointed CEO of Medallion Financial Corp. (NASDAQ:MFIN). 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 – 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.
How Does Alvin Murstein’s Compensation Compare With Similar Sized Companies?
According to our data, Medallion Financial Corp. has a market capitalization of US$66m, and paid its CEO total annual compensation worth US$1.5m over the year to December 2019. That’s a notable increase of 13% on last year. We think total compensation is more important but we note that the CEO salary is lower, at US$891k. We looked at a group of companies with market capitalizations under US$200m, and the median CEO total compensation was US$563k.
Pay mix tells us a lot about how a company functions versus the wider industry, and it’s no different in the case of Medallion Financial. On a sector level, around 16% of total compensation represents salary and 84% is other remuneration. Medallion Financial is paying a higher share of its remuneration through a salary in comparison to the overall industry.
It would therefore appear that Medallion Financial Corp. pays Alvin Murstein 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 get a better idea of how generous the pay is by looking at the performance of the underlying business. The graphic below shows how CEO compensation at Medallion Financial has changed from year to year.
Is Medallion Financial Corp. Growing?
On average over the last three years, Medallion Financial Corp. has shrunk earnings per share by 41% each year (measured with a line of best fit). It achieved revenue growth of 1.8% over the last year.
Sadly for shareholders, earnings per share are actually down, over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.
Has Medallion Financial Corp. Been A Good Investment?
Medallion Financial Corp. has generated a total shareholder return of 21% over three years, so most shareholders would be reasonably content. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.
We examined the amount Medallion Financial Corp. pays its CEO, and compared it to the amount paid by similar sized companies. We found that it pays well over the median amount paid in the benchmark group.
We think many shareholders would be underwhelmed with the business growth over the last three years. And shareholder returns are decent but not great. So we think more research is needed, but we don’t think the CEO underpaid. Shifting gears from CEO pay for a second, we’ve spotted 3 warning signs for Medallion Financial you should be aware of, and 1 of them is potentially serious.
If you want to buy a stock that is better than Medallion Financial, this free list of high return, low debt companies is a great place to look.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.