Shareholders May Not Be So Generous With Jumbo Interactive Limited's (ASX:JIN) CEO Compensation And Here's Why

The underwhelming share price performance of Jumbo Interactive Limited (ASX:JIN) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 10 November 2022. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Our analysis indicates that JIN is potentially undervalued!

How Does Total Compensation For Mike Veverka Compare With Other Companies In The Industry?

Our data indicates that Jumbo Interactive Limited has a market capitalization of AU$861m, and total annual CEO compensation was reported as AU$1.5m for the year to June 2022. We note that's an increase of 9.2% above last year. In particular, the salary of AU$821.5k, makes up a fairly large portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations ranging from AU$313m to AU$1.3b, the reported median CEO total compensation was AU$1.3m. So it looks like Jumbo Interactive compensates Mike Veverka in line with the median for the industry. Moreover, Mike Veverka also holds AU$9.2m worth of Jumbo Interactive stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2022	2021	Proportion (2022)
Salary	AU$821k	AU$834k	54%
Other	AU$697k	AU$556k	46%
Total Compensation	AU$1.5m	AU$1.4m	100%

On an industry level, around 54% of total compensation represents salary and 46% is other remuneration. Although there is a difference in how total compensation is set, Jumbo Interactive more or less reflects the market in terms of setting the salary. 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 Jumbo Interactive Limited's Growth Numbers

Jumbo Interactive Limited has seen its earnings per share (EPS) increase by 4.1% a year over the past three years. Its revenue is up 25% over the last year.

We like the look of the strong year-on-year improvement in revenue. And in that context, the modest EPS improvement certainly isn't shabby. So while we'd stop short of saying growth is absolutely outstanding, there are definitely some clear positives! Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Jumbo Interactive Limited Been A Good Investment?

Since shareholders would have lost about 28% over three years, some Jumbo Interactive 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...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 1 warning sign for Jumbo Interactive that investors should look into moving forward.

Important note: Jumbo Interactive 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. 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.