Mark Gray has been the CEO of Allegiance Coal Limited (ASX:AHQ) since 2017, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Allegiance Coal pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
How Does Total Compensation For Mark Gray Compare With Other Companies In The Industry?
According to our data, Allegiance Coal Limited has a market capitalization of AU$95m, and paid its CEO total annual compensation worth AU$501k over the year to June 2020. Notably, that's an increase of 25% over the year before. We note that the salary portion, which stands at AU$302.0k constitutes the majority of total compensation received by the CEO.
In comparison with other companies in the industry with market capitalizations under AU$259m, the reported median total CEO compensation was AU$310k. Hence, we can conclude that Mark Gray is remunerated higher than the industry median. Furthermore, Mark Gray directly owns AU$2.6m worth of shares in the company, implying that they are deeply invested in the company's success.
Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Allegiance Coal sets aside a smaller share of compensation for 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.
Allegiance Coal Limited's Growth
Allegiance Coal Limited has reduced its earnings per share by 50% a year over the last three years. In the last year, its revenue is down 70%.
Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Allegiance Coal Limited Been A Good Investment?
Allegiance Coal Limited has generated a total shareholder return of 32% over three years, so most shareholders would be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
As we noted earlier, Allegiance Coal pays its CEO higher than the norm for similar-sized companies belonging to the same industry. This doesn't look great when you realize that the company has been suffering from negative EPS growth for the last three years. And while shareholder returns have been respectable, they have hardly been superb. So you may want to delve deeper, because we don't think the amount Mark makes is justifiable.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 5 warning signs for Allegiance Coal (3 are a bit concerning!) that you should be aware of before investing here.
Important note: Allegiance Coal 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.
If you’re looking to trade Allegiance Coal, 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
Valuation is complex, but we're helping make it simple.
Find out whether Allegiance Coal is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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 (at) simplywallst.com.