We Think Some Shareholders May Hesitate To Increase Central Petroleum Limited's (ASX:CTP) CEO Compensation

Shareholders of Central Petroleum Limited (ASX:CTP) will have been dismayed by the negative share price return over the last three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. The AGM coming up on the 10 November 2022 could be an opportunity for shareholders to bring these concerns to the board's attention. 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 CTP is potentially undervalued!

How Does Total Compensation For Leon Devaney Compare With Other Companies In The Industry?

Our data indicates that Central Petroleum Limited has a market capitalization of AU$62m, and total annual CEO compensation was reported as AU$1.1m for the year to June 2022. That's just a smallish increase of 4.3% on last year. Notably, the salary which is AU$613.9k, represents a considerable chunk of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under AU$312m, the reported median total CEO compensation was AU$376k. This suggests that Leon Devaney is paid more than the median for the industry. Furthermore, Leon Devaney directly owns AU$222k worth of shares in the company.

Component	2022	2021	Proportion (2022)
Salary	AU$614k	AU$623k	56%
Other	AU$478k	AU$424k	44%
Total Compensation	AU$1.1m	AU$1.0m	100%

Speaking on an industry level, nearly 53% of total compensation represents salary, while the remainder of 47% is other remuneration. Our data reveals that Central Petroleum allocates salary more or less in line with the wider market. 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 Central Petroleum Limited's Growth Numbers

Central Petroleum Limited's earnings per share (EPS) grew 92% per year over the last three years. In the last year, its revenue is down 30%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Central Petroleum Limited Been A Good Investment?

Few Central Petroleum Limited shareholders would feel satisfied with the return of -48% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. 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. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 3 warning signs (and 2 which are a bit unpleasant) in Central Petroleum we think you should know about.

Important note: Central Petroleum 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.