What We Learned About Waterco's (ASX:WAT) CEO Compensation

Soon Goh is the CEO of Waterco Limited (ASX:WAT), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Waterco

How Does Total Compensation For Soon Goh Compare With Other Companies In The Industry?

Our data indicates that Waterco Limited has a market capitalization of AU$104m, and total annual CEO compensation was reported as AU$445k for the year to June 2020. This means that the compensation hasn't changed much from last year. In particular, the salary of AU$428.9k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under AU$271m, the reported median total CEO compensation was AU$275k. Hence, we can conclude that Soon Goh is remunerated higher than the industry median. Moreover, Soon Goh also holds AU$56m worth of Waterco stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 61% of total compensation represents salary, while the remainder of 39% is other remuneration. Investors will find it interesting that Waterco pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. 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.

A Look at Waterco Limited's Growth Numbers

Over the last three years, Waterco Limited has shrunk its earnings per share by 3.5% per year. Its revenue is up 12% over the last year.

Overall this is not a very positive result for shareholders. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Waterco Limited Been A Good Investment?

Most shareholders would probably be pleased with Waterco Limited for providing a total return of 61% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Waterco pays its CEO a majority of compensation through a salary. As we noted earlier, Waterco pays its CEO higher than the norm for similar-sized companies belonging to the same industry. We feel that EPS have been a bit disappointing, but it's nice to see positive shareholder returns over the last three years. Considering positive investor returns, it would be bold of us to criticize CEO compensation, but shareholders might want to see healthier EPS growth before a raise is given out.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 2 warning signs for Waterco that investors should look into moving forward.

Switching gears from Waterco, 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.

If you decide to trade Waterco, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.