Is GBM Resources Limited (ASX:GBZ) Overpaying Its CEO?

In 2007 Peter Thompson was appointed CEO of GBM Resources Limited (ASX:GBZ). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we’ll consider growth that the business demonstrates. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for GBM Resources

How Does Peter Thompson’s Compensation Compare With Similar Sized Companies?

According to our data, GBM Resources Limited has a market capitalization of AU$4.4m, and pays its CEO total annual compensation worth AU$235k. (This figure is for the year to 2018). While we always look at total compensation first, we note that the salary component is less, at AU$215k. We examined a group of similar sized companies, with market capitalizations of below AU$282m. The median CEO compensation in that group is AU$368k.

Most shareholders would consider it a positive that Peter Thompson takes less compensation than the CEOs of most similar size companies, leaving more for shareholders. While this is a good thing, you’ll need to understand the business better before you can form an opinion.

You can see a visual representation of the CEO compensation at GBM Resources, below.

ASX:GBZ CEO Compensation January 10th 19
ASX:GBZ CEO Compensation January 10th 19

Is GBM Resources Limited Growing?

On average over the last three years, GBM Resources Limited has grown earnings per share (EPS) by 26% each year (using a line of best fit). In the last year, its revenue is up 142%.

This demonstrates that the company has been improving recently. A good result. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see.

We don’t have analyst forecasts, but you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has GBM Resources Limited Been A Good Investment?

With a three year total loss of 71%, GBM Resources Limited would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.

In Summary…

It appears that GBM Resources Limited remunerates its CEO below most similar sized companies. Considering the underlying business is growing earnings, this would suggest the pay is modest. Unfortunately, some shareholders may be disappointed with their returns, given the company’s performance over the last three years. So while we don’t think, Peter Thompson is paid too much, shareholders may hope that business performance translates to investment returns before pay rises are given out.

When I see fairly low remuneration, combined with earnings per share growth, but without big share price gains, it makes me want to research the potential for future gains. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling GBM Resources (free visualization of insider trades).

Or you might rather take a peek at this analytical visualization of historic cash flow, earnings and revenue.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.