What Did Nanosonics' (ASX:NAN) CEO Take Home Last Year?

This article will reflect on the compensation paid to Michael Kavanagh who has served as CEO of Nanosonics Limited (ASX:NAN) since 2013. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

View our latest analysis for Nanosonics

Comparing Nanosonics Limited's CEO Compensation With the industry

Our data indicates that Nanosonics Limited has a market capitalization of AU$2.1b, and total annual CEO compensation was reported as AU$1.4m for the year to June 2020. That's a notable increase of 20% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$652k.

In comparison with other companies in the industry with market capitalizations ranging from AU$1.3b to AU$4.2b, the reported median CEO total compensation was AU$2.3m. This suggests that Michael Kavanagh is paid below the industry median. Furthermore, Michael Kavanagh directly owns AU$7.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 59% of total compensation out of all the companies we analyzed, while other remuneration made up 41% of the pie. Nanosonics pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Nanosonics Limited's Growth Numbers

Nanosonics Limited has reduced its earnings per share by 27% a year over the last three years. Its revenue is up 19% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. In conclusion we can't form a strong opinion about business performance yet; but it's one worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Nanosonics Limited Been A Good Investment?

Boasting a total shareholder return of 151% over three years, Nanosonics Limited has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

As previously discussed, Michael is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Meanwhile, shareholder returns and revenues are growing at a good clip. On the flip side, EPS growth during the same period is negative. But all things considered, we believe shareholders will be happy with the performance, and that's why CEO compensation is appropriate in our opinion.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Nanosonics that you should be aware of before investing.

Important note: Nanosonics 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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