Chris Richards became the CEO of Apiam Animal Health Limited (ASX:AHX) in 2015, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
See our latest analysis for Apiam Animal Health
How Does Total Compensation For Chris Richards Compare With Other Companies In The Industry?
Our data indicates that Apiam Animal Health Limited has a market capitalization of AU$74m, and total annual CEO compensation was reported as AU$401k for the year to June 2020. That's a modest increase of 3.1% on the prior year. We note that the salary portion, which stands at AU$354.7k constitutes the majority of total compensation received by the CEO.
In comparison with other companies in the industry with market capitalizations under AU$261m, the reported median total CEO compensation was AU$421k. This suggests that Apiam Animal Health remunerates its CEO largely in line with the industry average. Moreover, Chris Richards also holds AU$19m worth of Apiam Animal Health stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | AU$355k | AU$350k | 88% |
| Other | AU$47k | AU$39k | 12% |
| Total Compensation | AU$401k | AU$389k | 100% |
Speaking on an industry level, nearly 75% of total compensation represents salary, while the remainder of 25% is other remuneration. Apiam Animal Health 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.
A Look at Apiam Animal Health Limited's Growth Numbers
Over the last three years, Apiam Animal Health Limited has shrunk its earnings per share by 8.8% per year. Its revenue is up 5.9% over the last year.
The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Apiam Animal Health Limited Been A Good Investment?
Given the total shareholder loss of 19% over three years, many shareholders in Apiam Animal Health Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.
To Conclude...
As we noted earlier, Apiam Animal Health pays its CEO in line with similar-sized companies belonging to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 4 warning signs for Apiam Animal Health that investors should be aware of in a dynamic business environment.
Important note: Apiam Animal Health 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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About ASX:AHX
Apiam Animal Health
A vertically integrated animal health company, provides veterinary products and services to production and companion animals, and equine in Australia.
Good value with proven track record.
