Increases to Emeco Holdings Limited's (ASX:EHL) CEO Compensation Might Cool off for now

The underwhelming share price performance of Emeco Holdings Limited (ASX:EHL) in the past three years would have disappointed many shareholders. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 18 November 2021. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Emeco Holdings

How Does Total Compensation For Ian Testrow Compare With Other Companies In The Industry?

According to our data, Emeco Holdings Limited has a market capitalization of AU$563m, and paid its CEO total annual compensation worth AU$5.3m over the year to June 2021. Notably, that's a decrease of 46% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$1.0m.

On examining similar-sized companies in the industry with market capitalizations between AU$272m and AU$1.1b, we discovered that the median CEO total compensation of that group was AU$966k. This suggests that Ian Testrow is paid more than the median for the industry. What's more, Ian Testrow holds AU$13m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	AU$1.0m	AU$1.1m	19%
Other	AU$4.3m	AU$8.9m	81%
Total Compensation	AU$5.3m	AU$10.0m	100%

Speaking on an industry level, nearly 53% of total compensation represents salary, while the remainder of 47% is other remuneration. Emeco Holdings sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Emeco Holdings Limited's Growth

Emeco Holdings Limited has seen its earnings per share (EPS) increase by 24% a year over the past three years. Its revenue is up 15% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Emeco Holdings Limited Been A Good Investment?

The return of -62% over three years would not have pleased Emeco Holdings Limited shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 1 which makes us a bit uncomfortable) in Emeco Holdings we think you should know about.

Switching gears from Emeco Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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