It's Unlikely That SomnoMed Limited's (ASX:SOM) CEO Will See A Huge Pay Rise This Year

Shareholders of SomnoMed Limited (ASX:SOM) will have been dismayed by the negative share price return over the last three years. In addition, the company's per-share earnings growth is not looking good, despite growing revenues. In light of this performance, shareholders will have a chance to question the board in the upcoming AGM on 25 November 2022, where they can impact on future company performance by voting on resolutions, including executive compensation. We think shareholders may be cautious of approving a pay rise for the CEO at the moment, based on our analysis below.

Check out the opportunities and risks within the AU Medical Equipment industry.

Comparing SomnoMed Limited's CEO Compensation With The Industry

According to our data, SomnoMed Limited has a market capitalization of AU$108m, and paid its CEO total annual compensation worth AU$1.0m over the year to June 2022. Notably, that's an increase of 55% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$505k.

In comparison with other companies in the industry with market capitalizations under AU$301m, the reported median total CEO compensation was AU$535k. This suggests that Neil Verdal-Austin is paid more than the median for the industry. Furthermore, Neil Verdal-Austin directly owns AU$2.2m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2022	2021	Proportion (2022)
Salary	AU$505k	AU$393k	49%
Other	AU$535k	AU$277k	51%
Total Compensation	AU$1.0m	AU$670k	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 SomnoMed allocates a smaller portion of compensation to salary in comparison 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.

SomnoMed Limited's Growth

Over the last three years, SomnoMed Limited has shrunk its earnings per share by 109% per year. It achieved revenue growth of 16% over the last year.

Investors would be a bit wary of companies that have lower EPS But in contrast the revenue growth is strong, suggesting future potential for EPS growth. 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 SomnoMed Limited Been A Good Investment?

With a total shareholder return of -47% over three years, SomnoMed Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The returns to shareholders is disappointing along with lack of earnings growth, which goes some way in explaining the poor returns. In the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan is in line with their expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for SomnoMed that investors should look into moving forward.

Important note: SomnoMed 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.