Stock Analysis

It Looks Like Mount Gibson Iron Limited's (ASX:MGX) CEO May Expect Their Salary To Be Put Under The Microscope

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ASX:MGX
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Shareholders will probably not be too impressed with the underwhelming results at Mount Gibson Iron Limited (ASX:MGX) recently. At the upcoming AGM on 10 November 2021, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. The data we present below explains why we think CEO compensation is not consistent with recent performance.

Check out our latest analysis for Mount Gibson Iron

Comparing Mount Gibson Iron Limited's CEO Compensation With the industry

At the time of writing, our data shows that Mount Gibson Iron Limited has a market capitalization of AU$478m, and reported total annual CEO compensation of AU$1.1m for the year to June 2021. We note that's an increase of 9.3% above last year. In particular, the salary of AU$635.0k, makes up a fairly large portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the industry with market capitalizations between AU$269m and AU$1.1b, we discovered that the median CEO total compensation of that group was AU$942k. So it looks like Mount Gibson Iron compensates Peter Kerr in line with the median for the industry. Furthermore, Peter Kerr directly owns AU$1.4m worth of shares in the company.

Component20212020Proportion (2021)
Salary AU$635k AU$584k 59%
Other AU$449k AU$408k 41%
Total CompensationAU$1.1m AU$992k100%

Speaking on an industry level, nearly 59% of total compensation represents salary, while the remainder of 41% is other remuneration. Although there is a difference in how total compensation is set, Mount Gibson Iron more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

ceo-compensation
ASX:MGX CEO Compensation November 3rd 2021

A Look at Mount Gibson Iron Limited's Growth Numbers

Mount Gibson Iron Limited has reduced its earnings per share by 16% a year over the last three years. It saw its revenue drop 26% over the last year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Mount Gibson Iron Limited Been A Good Investment?

Since shareholders would have lost about 26% over three years, some Mount Gibson Iron Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Mount Gibson Iron you should be aware of, and 1 of them is concerning.

Switching gears from Mount Gibson Iron, 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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