Shareholders May Find It Hard To Justify Increasing AdAlta Limited's (ASX:1AD) CEO Compensation For Now

Shareholders of AdAlta Limited (ASX:1AD) will have been dismayed by the negative share price return over the last three years. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 22 November 2022. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for AdAlta

How Does Total Compensation For Tim Oldham Compare With Other Companies In The Industry?

According to our data, AdAlta Limited has a market capitalization of AU$14m, and paid its CEO total annual compensation worth AU$485k over the year to June 2022. That is, the compensation was roughly the same as last year. In particular, the salary of AU$315.0k, 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$295m, reported a median total CEO compensation of AU$638k. So it looks like AdAlta compensates Tim Oldham in line with the median for the industry.

Component	2022	2021	Proportion (2022)
Salary	AU$315k	AU$300k	65%
Other	AU$170k	AU$199k	35%
Total Compensation	AU$485k	AU$499k	100%

On an industry level, roughly 49% of total compensation represents salary and 51% is other remuneration. AdAlta pays out 65% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at AdAlta Limited's Growth Numbers

AdAlta Limited has seen its earnings per share (EPS) increase by 40% a year over the past three years. It saw its revenue drop 31% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. 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 AdAlta Limited Been A Good Investment?

Few AdAlta Limited shareholders would feel satisfied with the return of -60% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 4 warning signs (and 2 which can't be ignored) in AdAlta we think you should know about.

Important note: AdAlta 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.