What Can We Learn About Estrella Resources' (ASX:ESR) CEO Compensation?

Chris Daws has been the CEO of Estrella Resources Limited (ASX:ESR) 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 Estrella Resources pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Estrella Resources

Comparing Estrella Resources Limited's CEO Compensation With the industry

Our data indicates that Estrella Resources Limited has a market capitalization of AU$65m, and total annual CEO compensation was reported as AU$268k for the year to June 2020. This means that the compensation hasn't changed much from last year. In particular, the salary of AU$234.0k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under AU$258m, the reported median total CEO compensation was AU$311k. So it looks like Estrella Resources compensates Chris Daws in line with the median for the industry. Moreover, Chris Daws also holds AU$1.9m worth of Estrella Resources stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 68% of total compensation represents salary and 32% is other remuneration. It's interesting to note that Estrella Resources pays out a greater portion of remuneration through salary, compared to the industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Estrella Resources Limited's Growth

Over the past three years, Estrella Resources Limited has seen its earnings per share (EPS) grow by 34% per year. In the last year, its revenue has collapsed effectively to zero.

This demonstrates that the company has been improving recently and is good news for the shareholders. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Estrella Resources Limited Been A Good Investment?

We think that the total shareholder return of 265%, over three years, would leave most Estrella Resources Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

As previously discussed, Chris is compensated close to the median for companies of its size, and which belong to the same industry. Few would be critical of the leadership, since returns have been juicy and EPS are moving in the right direction. 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 5 warning signs for Estrella Resources (2 make us uncomfortable!) that you should be aware of before investing here.

Important note: Estrella 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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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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