How Should Investors React To Predictive Discovery's (ASX:PDI) CEO Pay?

Paul Roberts is the CEO of Predictive Discovery Limited (ASX:PDI), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Predictive Discovery.

Check out our latest analysis for Predictive Discovery

Comparing Predictive Discovery Limited's CEO Compensation With the industry

Our data indicates that Predictive Discovery Limited has a market capitalization of AU$64m, and total annual CEO compensation was reported as AU$205k for the year to June 2020. That is, the compensation was roughly the same as last year. Notably, the salary of AU$205k is the entirety of the CEO compensation.

On comparing similar-sized companies in the industry with market capitalizations below AU$257m, we found that the median total CEO compensation was AU$309k. Accordingly, Predictive Discovery pays its CEO under the industry median. Furthermore, Paul Roberts directly owns AU$376k worth of shares in the company.

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Speaking on a company level, Predictive Discovery prefers to tread along a traditional path, disbursing all compensation through a salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Predictive Discovery Limited's Growth

Predictive Discovery Limited's earnings per share (EPS) grew 38% per year over the last three years. It saw its revenue drop 37% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. 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 Predictive Discovery Limited Been A Good Investment?

Boasting a total shareholder return of 60% over three years, Predictive Discovery Limited has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

Predictive Discovery pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. As we noted earlier, Predictive Discovery pays its CEO lower than the norm for similar-sized companies belonging to the same industry. Considering robust EPS growth, we believe Paul to be modestly paid. Plus, we can't ignore the impressive shareholder returns, and won't be surprised if some shareholders were to reward such excellent all-around performance with a raise.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 2 which are concerning) in Predictive Discovery we think you should know about.

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. 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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