Stock Analysis

What Can We Make Of Midway's (ASX:MWY) CEO Compensation?

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ASX:MWY
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Tony Price became the CEO of Midway Limited (ASX:MWY) in 2015, 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 Midway pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

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Comparing Midway Limited's CEO Compensation With the industry

At the time of writing, our data shows that Midway Limited has a market capitalization of AU$87m, and reported total annual CEO compensation of AU$534k for the year to June 2020. That's a notable decrease of 19% on last year. Notably, the salary which is AU$423.4k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below AU$272m, reported a median total CEO compensation of AU$242k. This suggests that Tony Price is paid more than the median for the industry. What's more, Tony Price holds AU$193k worth of shares in the company in their own name.

Component20202019Proportion (2020)
Salary AU$423k AU$421k 79%
Other AU$110k AU$239k 21%
Total CompensationAU$534k AU$660k100%

On an industry level, around 72% of total compensation represents salary and 28% is other remuneration. Although there is a difference in how total compensation is set, Midway more or less reflects the market in terms of setting the salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
ASX:MWY CEO Compensation November 26th 2020

Midway Limited's Growth

Over the last three years, Midway Limited has shrunk its earnings per share by 27% per year. In the last year, its revenue is down 8.7%.

Few shareholders would be pleased to read that EPS have declined. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Midway Limited Been A Good Investment?

Since shareholders would have lost about 53% over three years, some Midway Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As we noted earlier, Midway pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. Arguably worse, we've been waiting for positive EPS growth for the last three years. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Midway that you should be aware of before investing.

Important note: Midway 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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