Tim Salt became the CEO of GWA Group Limited (ASX:GWA) in 2016, 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 assess whether GWA Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Check out our latest analysis for GWA Group
Comparing GWA Group Limited's CEO Compensation With the industry
At the time of writing, our data shows that GWA Group Limited has a market capitalization of AU$922m, and reported total annual CEO compensation of AU$1.7m for the year to June 2020. That's a notable decrease of 9.4% on last year. In particular, the salary of AU$967.5k, makes up a huge portion of the total compensation being paid to the CEO.
For comparison, other companies in the same industry with market capitalizations ranging between AU$518m and AU$2.1b had a median total CEO compensation of AU$1.4m. From this we gather that Tim Salt is paid around the median for CEOs in the industry. Moreover, Tim Salt also holds AU$2.5m worth of GWA Group stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | AU$968k | AU$967k | 58% |
| Other | AU$706k | AU$879k | 42% |
| Total Compensation | AU$1.7m | AU$1.8m | 100% |
On an industry level, roughly 62% of total compensation represents salary and 38% is other remuneration. Our data reveals that GWA Group allocates salary more or less in line with the wider market. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
GWA Group Limited's Growth
Over the last three years, GWA Group Limited has shrunk its earnings per share by 3.8% per year. Its revenue is up 4.4% over the last year.
Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has GWA Group Limited Been A Good Investment?
Most shareholders would probably be pleased with GWA Group Limited for providing a total return of 40% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
As we touched on above, GWA Group Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. But on the bright side, shareholder returns have moved northward during the same period. We wouldn't say CEO compensation is too high, but shrinking EPS is undoubtedly an issue that will have to be addressed.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for GWA Group that you should be aware of before investing.
Important note: GWA Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE 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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About ASX:GWA
GWA Group
Researches, designs, manufactures, imports, and markets building fixtures and fittings to residential and commercial premises in Australia, New Zealand, and internationally.
Very undervalued with excellent balance sheet and pays a dividend.
