Will Robinson became the CEO of Encounter Resources Limited (ASX:ENR) in 2004, 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 assess whether Encounter Resources pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Encounter Resources Limited's CEO Compensation With the industry
At the time of writing, our data shows that Encounter Resources Limited has a market capitalization of AU$46m, and reported total annual CEO compensation of AU$353k for the year to June 2020. That's a notable increase of 21% on last year. We note that the salary portion, which stands at AU$264.4k constitutes the majority of total compensation received by the CEO.
In comparison with other companies in the industry with market capitalizations under AU$264m, the reported median total CEO compensation was AU$309k. So it looks like Encounter Resources compensates Will Robinson in line with the median for the industry. Furthermore, Will Robinson directly owns AU$3.6m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, around 69% of total compensation represents salary and 31% is other remuneration. There isn't a significant difference between Encounter Resources and the broader market, in terms of salary allocation in the overall compensation package. 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 Encounter Resources Limited's Growth Numbers
Encounter Resources Limited's earnings per share (EPS) grew 29% per year over the last three years. It saw its revenue drop 91% over the last year.
This demonstrates that the company has been improving recently and is good news for the shareholders. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 Encounter Resources Limited Been A Good Investment?
We think that the total shareholder return of 100%, over three years, would leave most Encounter 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.
As we touched on above, Encounter Resources Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Investors would surely be happy to see that returns have been great, and that EPS is up. Although the pay is close to the industry median, overall performance is excellent, so we don't think the CEO is paid too generously. Stockholders might even be okay with a bump in pay, seeing as how investor returns have been so strong.
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. We identified 6 warning signs for Encounter Resources (2 are concerning!) that you should be aware of before investing here.
Important note: Encounter Resources 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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