A Quick Analysis On SDI's (ASX:SDI) CEO Compensation

Samantha Cheetham became the CEO of SDI Limited (ASX:SDI) in 2016, 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.

View our latest analysis for SDI

Comparing SDI Limited's CEO Compensation With the industry

According to our data, SDI Limited has a market capitalization of AU$94m, and paid its CEO total annual compensation worth AU$510k over the year to June 2020. That's a notable decrease of 18% on last year. We note that the salary portion, which stands at AU$425.3k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below AU$279m, reported a median total CEO compensation of AU$586k. This suggests that SDI remunerates its CEO largely in line with the industry average. Moreover, Samantha Cheetham also holds AU$293k worth of SDI stock directly under their own name.

On an industry level, around 63% of total compensation represents salary and 37% is other remuneration. It's interesting to note that SDI pays out a greater portion of remuneration through salary, compared to the industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

SDI Limited's Growth

Over the last three years, SDI Limited has shrunk its earnings per share by 8.7% per year. It saw its revenue drop 15% over the last year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 SDI Limited Been A Good Investment?

Most shareholders would probably be pleased with SDI Limited for providing a total return of 55% over three years. 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, Samantha is compensated close to the median for companies of its size, and which belong to the same industry. Some investors may take issue with this, especially considering shrinking EPS for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We're not saying CEO compensation is too generous, but shrinking EPS is undoubtedly an issue that will have to be addressed.

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. That's why we did our research, and identified 3 warning signs for SDI (of which 1 is significant!) that you should know about in order to have a holistic understanding of the stock.

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.

If you’re looking to trade SDI, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.