Key Things To Understand About Kip McGrath Education Centres' (ASX:KME) CEO Pay Cheque

Storm McGrath became the CEO of Kip McGrath Education Centres Limited (ASX:KME) in 2007, 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 Kip McGrath Education Centres.

See our latest analysis for Kip McGrath Education Centres

How Does Total Compensation For Storm McGrath Compare With Other Companies In The Industry?

Our data indicates that Kip McGrath Education Centres Limited has a market capitalization of AU$78m, and total annual CEO compensation was reported as AU$455k for the year to June 2020. This means that the compensation hasn't changed much from last year. In particular, the salary of AU$383.1k, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$260m, we found that the median total CEO compensation was AU$497k. From this we gather that Storm McGrath is paid around the median for CEOs in the industry. What's more, Storm McGrath holds AU$4.4m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, nearly 76% of total compensation represents salary, while the remainder of 24% is other remuneration. Kip McGrath Education Centres is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Kip McGrath Education Centres Limited's Growth

Kip McGrath Education Centres Limited's earnings per share (EPS) grew 2.6% per year over the last three years. It achieved revenue growth of 5.2% over the last year.

We'd prefer higher revenue growth, but it is good to see modest EPS growth. It's clear the performance has been quite decent, but it it falls short of outstanding,based on this information. 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 Kip McGrath Education Centres Limited Been A Good Investment?

Most shareholders would probably be pleased with Kip McGrath Education Centres Limited for providing a total return of 207% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

As previously discussed, Storm is compensated close to the median for companies of its size, and which belong to the same industry. But the business isn't reporting great numbers in terms of EPS growth. Meanwhile, shareholder returns have remained positive over the same time frame. So while shareholders shouldn't be overly concerned about CEO compensation, we suspect most would prefer to see improved performance, before a bump in pay.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 6 warning signs for Kip McGrath Education Centres (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

Important note: Kip McGrath Education Centres 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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