How Should Investors React To carsales.com Ltd’s (ASX:CAR) CEO Pay?

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Cameron McIntyre became the CEO of carsales.com Ltd (ASX:CAR) in 2017. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for carsales.com

How Does Cameron McIntyre’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that carsales.com Ltd has a market cap of AU$3.4b, and is paying total annual CEO compensation of AU$2.5m. (This figure is for the year to June 2018). We think total compensation is more important but we note that the CEO salary is lower, at AU$1.2m. We looked at a group of companies with market capitalizations from AU$1.4b to AU$4.6b, and the median CEO total compensation was AU$2.4m.

That means Cameron McIntyre receives fairly typical remuneration for the CEO of a company that size. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

You can see, below, how CEO compensation at carsales.com has changed over time.

ASX:CAR CEO Compensation, July 3rd 2019
ASX:CAR CEO Compensation, July 3rd 2019

Is carsales.com Ltd Growing?

Over the last three years carsales.com Ltd has grown its earnings per share (EPS) by an average of 16% per year (using a line of best fit). It achieved revenue growth of 21% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business.

Has carsales.com Ltd Been A Good Investment?

With a total shareholder return of 28% over three years, carsales.com Ltd shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary…

Remuneration for Cameron McIntyre is close enough to the median pay for a CEO of a similar sized company .

Shareholder returns could be better but shareholders would be pleased with the positive EPS growth. As a result of these considerations, I would suggest the CEO pay is reasonable. Whatever your view on compensation, you might want to check if insiders are buying or selling carsales.com shares (free trial).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.