Shareholders May Not Be So Generous With Micro-X Limited's (ASX:MX1) CEO Compensation And Here's Why

Shareholders of Micro-X Limited (ASX:MX1) 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 14 November 2022 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. 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 MX1 is potentially overvalued!

How Does Total Compensation For Peter Rowland Compare With Other Companies In The Industry?

At the time of writing, our data shows that Micro-X Limited has a market capitalization of AU$63m, and reported total annual CEO compensation of AU$627k for the year to June 2022. Notably, that's a decrease of 12% over the year before. We note that the salary of AU$332.6k makes up a sizeable portion of the total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$310m, we found that the median total CEO compensation was AU$538k. This suggests that Micro-X remunerates its CEO largely in line with the industry average. Moreover, Peter Rowland also holds AU$1.7m worth of Micro-X stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2022	2021	Proportion (2022)
Salary	AU$333k	AU$309k	53%
Other	AU$294k	AU$402k	47%
Total Compensation	AU$627k	AU$711k	100%

Talking in terms of the industry, salary represented approximately 61% of total compensation out of all the companies we analyzed, while other remuneration made up 39% of the pie. It's interesting to note that Micro-X allocates a smaller portion of compensation to salary in comparison to the broader industry. 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.

Micro-X Limited's Growth

Micro-X Limited has seen its earnings per share (EPS) increase by 16% a year over the past three years. In the last year, its revenue is up 138%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. 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 Micro-X Limited Been A Good Investment?

The return of -47% over three years would not have pleased Micro-X Limited shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for Micro-X that you should be aware of before investing.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.