How Is Embelton's (ASX:EMB) CEO Compensated?

James Embelton became the CEO of Embelton Limited (ASX:EMB) in 2010, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Embelton.

See our latest analysis for Embelton

Comparing Embelton Limited's CEO Compensation With the industry

Our data indicates that Embelton Limited has a market capitalization of AU$24m, and total annual CEO compensation was reported as AU$476k for the year to June 2020. That's a fairly small increase of 5.5% over the previous year. We note that the salary portion, which stands at AU$349.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$264m, we found that the median total CEO compensation was AU$211k. This suggests that James Embelton is paid more than the median for the industry. Moreover, James Embelton also holds AU$351k worth of Embelton stock directly under their own name.

On an industry level, roughly 63% of total compensation represents salary and 37% is other remuneration. Embelton pays out 73% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Embelton Limited's Growth

Over the last three years, Embelton Limited has not seen its earnings per share change much, though they have deteriorated slightly. It achieved revenue growth of 25% over the last year.

Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. 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 Embelton Limited Been A Good Investment?

Since shareholders would have lost about 3.7% over three years, some Embelton Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As we noted earlier, Embelton pays its CEO higher than the norm for similar-sized companies belonging to the same industry. It concerns us that EPS growth for the company is negative, while share price gains did not materialize over the last three years. On the bright side, at lease revenue growth seems to be marching northward. Few would argue that it's wise for the company to pay any more, before returns improve.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 3 warning signs for Embelton you should be aware of, and 1 of them can't be ignored.

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.
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