This article will reflect on the compensation paid to Ron Hodge who has served as CEO of InvestSMART Group Limited (ASX:INV) since 2016. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Comparing InvestSMART Group Limited's CEO Compensation With the industry
At the time of writing, our data shows that InvestSMART Group Limited has a market capitalization of AU$12m, and reported total annual CEO compensation of AU$282k for the year to June 2020. Notably, that's a decrease of 27% over the year before. In particular, the salary of AU$248.6k, 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$268m, the reported median total CEO compensation was AU$445k. This suggests that Ron Hodge is paid below the industry median. Furthermore, Ron Hodge directly owns AU$1.3m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. According to our research, InvestSMART Group has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at InvestSMART Group Limited's Growth Numbers
InvestSMART Group Limited has seen its earnings per share (EPS) increase by 108% a year over the past three years. It saw its revenue drop 11% over the last year.
Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 InvestSMART Group Limited Been A Good Investment?
With a three year total loss of 73% for the shareholders, InvestSMART Group Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
As we noted earlier, InvestSMART Group pays its CEO lower than the norm for similar-sized companies belonging to the same industry. Importantly though, the company has impressed with its EPS growth over three years. Although we would've liked to see positive investor returns, it would be bold of us to criticize CEO compensation when EPS are up. But shareholders will likely want to hold off on any raise for Ron until investor returns are positive.
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 1 warning sign for InvestSMART Group that you should be aware of before investing.
Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.
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