Here's Why carsales.com Ltd's (ASX:CAR) CEO Compensation Is The Least Of Shareholders' Concerns

The share price of carsales.com Ltd (ASX:CAR) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 29 October 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for carsales.com

How Does Total Compensation For Cameron McIntyre Compare With Other Companies In The Industry?

Our data indicates that carsales.com Ltd has a market capitalization of AU$7.0b, and total annual CEO compensation was reported as AU$4.1m for the year to June 2021. We note that's an increase of 75% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$1.5m.

For comparison, other companies in the same industry with market capitalizations ranging between AU$5.3b and AU$16b had a median total CEO compensation of AU$3.2m. From this we gather that Cameron McIntyre is paid around the median for CEOs in the industry. Furthermore, Cameron McIntyre directly owns AU$8.3m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	AU$1.5m	AU$1.3m	36%
Other	AU$2.6m	AU$999k	64%
Total Compensation	AU$4.1m	AU$2.3m	100%

On an industry level, around 51% of total compensation represents salary and 49% is other remuneration. carsales.com pays a modest slice of remuneration through salary, as compared to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at carsales.com Ltd's Growth Numbers

carsales.com Ltd has reduced its earnings per share by 15% a year over the last three years. Its revenue is up 8.4% over the last year.

Few shareholders would be pleased to read that EPS have declined. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 carsales.com Ltd Been A Good Investment?

Boasting a total shareholder return of 122% over three years, carsales.com Ltd 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...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for carsales.com that investors should be aware of in a dynamic business environment.

Important note: carsales.com 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.

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.

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