How Much Did Arafura Resources' (ASX:ARU) CEO Pocket Last Year?

Gavin Lockyer became the CEO of Arafura Resources Limited (ASX:ARU) in 2013, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Arafura Resources.

See our latest analysis for Arafura Resources

Comparing Arafura Resources Limited's CEO Compensation With the industry

According to our data, Arafura Resources Limited has a market capitalization of AU$140m, and paid its CEO total annual compensation worth AU$508k over the year to June 2020. That's a slightly lower by 4.7% over the previous year. We note that the salary portion, which stands at AU$401.1k constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations under AU$265m, the reported median total CEO compensation was AU$309k. This suggests that Gavin Lockyer is paid more than the median for the industry. Moreover, Gavin Lockyer also holds AU$219k worth of Arafura Resources stock directly under their own name.

Talking in terms of the industry, salary represented approximately 69% of total compensation out of all the companies we analyzed, while other remuneration made up 31% of the pie. It's interesting to note that Arafura Resources pays out a greater portion of remuneration through salary, compared to the industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Arafura Resources Limited's Growth Numbers

Over the past three years, Arafura Resources Limited has seen its earnings per share (EPS) grow by 9.8% per year. Its revenue is down 37% over the previous year.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. It's hard to reach a conclusion about business performance right now. This may be one to watch. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Arafura Resources Limited Been A Good Investment?

We think that the total shareholder return of 35%, over three years, would leave most Arafura Resources Limited shareholders smiling. 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.

To Conclude...

As we touched on above, Arafura Resources Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Still, shareholder returns for the company are very impressive for the last three years. That's why we were hoping EPS growth would match this growth, but sadly that is not the case. We'd ideally want to see higher EPS growth, but CEO compensation seems to be within reason, given high shareholder returns.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 4 warning signs for Arafura Resources you should be aware of, and 1 of them is concerning.

Switching gears from Arafura Resources, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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