What has FXL's performance been like?
Profitability of a company is a strong indication of FXL's ability to generate returns on shareholders' funds through corporate activities. In this exercise, I will use profits as a proxy for Brewis-Weston's performance. Recently, FXL released negative earnings of -AU$10.30M , compared to the previous year's positive earnings. Additionally, FXL hasn’t always been loss-making, with an average EPS of AU$0.20 over the past five years. During times of negative earnings, the company may be facing a period of reinvestment and growth, or it can be a sign of some headwind. In any event, CEO compensation should be reflective of the current state of the business. In the most recent financial statments, Brewis-Weston's total remuneration more than doubled, to AU$1.09M .What's a reasonable CEO compensation?
While one size does not fit all, as remuneration should be tailored to the specific company and market, we can estimate a high-level thresold to see if FXL deviates substantially from its peers. This exercise can help shareholders ask the right question about Brewis-Weston’s incentive alignment. On average, an Australian mid-cap has a value of $1.7B, creates earnings of $95M and pays its CEO at roughly $1.5M per annum. Usually I would look at market cap and earnings as a proxy for performance, however, FXL's negative earnings lower the effectiveness of this method. Given the range of pay for mid-cap executives, it seems like Brewis-Weston is paid aptly compared to those in similar-sized companies. Putting everything together, though FXL is loss-making, it seems like the CEO’s pay is sound.
Next Steps:
In the upcoming year's AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Brewis-Weston's pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about FXL's governance, look through our infographic report of the company's board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FXL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.