Should You Worry About Prime Focus Limited's (NSE:PFOCUS) CEO Pay Cheque?

Naresh Malhotra is the CEO of Prime Focus Limited (NSE:PFOCUS). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. 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.

See our latest analysis for Prime Focus

How Does Naresh Malhotra's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Prime Focus Limited has a market cap of ₹7.9b, and reported total annual CEO compensation of ₹12m for the year to March 2019. It is worth noting that the CEO compensation consists almost entirely of the salary, worth ₹12m. We took a group of companies with market capitalizations below ₹15b, and calculated the median CEO total compensation to be ₹3.8m.

Pay mix tells us a lot about how a company functions versus the wider industry, and it's no different in the case of Prime Focus. Talking in terms of the sector, salary represented approximately 99% of total compensation out of all the companies we analysed, while other remuneration made up 1.1% of the pie. On a company level, Prime Focus prefers to reward its CEO through a salary, opting not to pay Naresh Malhotra through non-salary benefits.

Thus we can conclude that Naresh Malhotra receives more in total compensation than the median of a group of companies in the same market, and of similar size to Prime Focus Limited. However, this doesn't necessarily mean the pay 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 Prime Focus, below.

Is Prime Focus Limited Growing?

On average over the last three years, Prime Focus Limited has shrunk earnings per share by 90% each year (measured with a line of best fit). In the last year, its revenue is up 12%.

Few shareholders would be pleased to read that earnings per share are lower over three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Prime Focus Limited Been A Good Investment?

Given the total loss of 76% over three years, many shareholders in Prime Focus Limited are probably rather dissatisfied, to say the least. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

We compared total CEO remuneration at Prime Focus Limited with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

Earnings per share have not grown in three years, and the revenue growth fails to impress us. Over the same period, investors would have come away with nothing in the way of share price gains. This analysis suggests to us that the CEO is paid too generously! Moving away from CEO compensation for the moment, we've identified 1 warning sign for Prime Focus that you should be aware of before investing.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

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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.