Here's Why We Think SportsHero Limited's (ASX:SHO) CEO Compensation Looks Fair

Performance at SportsHero Limited (ASX:SHO) has been rather uninspiring recently and shareholders may be wondering how CEO Tom Tonavanik plans to fix this. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 29 November 2022. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

Our analysis indicates that SHO is potentially overvalued!

How Does Total Compensation For Tom Tonavanik Compare With Other Companies In The Industry?

At the time of writing, our data shows that SportsHero Limited has a market capitalization of AU$13m, and reported total annual CEO compensation of US$169k for the year to June 2022. That's a slight decrease of 3.7% on the prior year. In particular, the salary of US$147.1k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below AU$303m, reported a median total CEO compensation of US$378k. That is to say, Tom Tonavanik is paid under the industry median. Moreover, Tom Tonavanik also holds AU$317k worth of SportsHero stock directly under their own name.

Component	2022	2021	Proportion (2022)
Salary	US$147k	US$106k	87%
Other	US$22k	US$69k	13%
Total Compensation	US$169k	US$175k	100%

Speaking on an industry level, nearly 66% of total compensation represents salary, while the remainder of 34% is other remuneration. According to our research, SportsHero has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

SportsHero Limited's Growth

SportsHero Limited has seen its earnings per share (EPS) increase by 42% a year over the past three years. Its revenue is up 3.8% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has SportsHero Limited Been A Good Investment?

Few SportsHero Limited shareholders would feel satisfied with the return of -41% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss is certainly disheartening. The share price trend has diverged with the robust growth in EPS however, suggesting there may be other factors that could be driving the price performance. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. In the upcoming AGM, shareholders will get the opportunity to discuss these concerns with the board and assess if the board's plan is likely to improve company performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 4 warning signs for SportsHero (3 are concerning!) that you should be aware of before investing here.

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.