Here's Why It's Unlikely That Mitchell Services Limited's (ASX:MSV) CEO Will See A Pay Rise This Year

Shareholders will probably not be too impressed with the underwhelming results at Mitchell Services Limited (ASX:MSV) recently. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 16 November 2022. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Our analysis indicates that MSV is potentially undervalued!

How Does Total Compensation For Andrew Elf Compare With Other Companies In The Industry?

According to our data, Mitchell Services Limited has a market capitalization of AU$87m, and paid its CEO total annual compensation worth AU$739k over the year to June 2022. We note that's a decrease of 9.1% compared to last year. In particular, the salary of AU$433.3k, makes up a fairly large portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$306m, we found that the median total CEO compensation was AU$362k. Accordingly, our analysis reveals that Mitchell Services Limited pays Andrew Elf north of the industry median. Furthermore, Andrew Elf directly owns AU$228k worth of shares in the company.

Component	2022	2021	Proportion (2022)
Salary	AU$433k	AU$400k	59%
Other	AU$306k	AU$414k	41%
Total Compensation	AU$739k	AU$814k	100%

Talking in terms of the industry, salary represented approximately 60% of total compensation out of all the companies we analyzed, while other remuneration made up 40% of the pie. Our data reveals that Mitchell Services allocates salary more or less in line with the wider market. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Mitchell Services Limited's Growth

Over the last three years, Mitchell Services Limited has shrunk its earnings per share by 92% per year. Its revenue is up 11% over the last year.

Few shareholders would be pleased to read that EPS have declined. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Mitchell Services Limited Been A Good Investment?

Few Mitchell Services Limited shareholders would feel satisfied with the return of -34% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 2 warning signs for Mitchell Services that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.