Here's Why Shareholders May Want To Be Cautious With Increasing Acrux Limited's (ASX:ACR) CEO Pay Packet

The underwhelming share price performance of Acrux Limited (ASX:ACR) in the past three years would have disappointed many shareholders. 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 influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Our analysis indicates that ACR is potentially overvalued!

How Does Total Compensation For Michael Kotsanis Compare With Other Companies In The Industry?

Our data indicates that Acrux Limited has a market capitalization of AU$19m, and total annual CEO compensation was reported as AU$670k for the year to June 2022. That's a fairly small increase of 3.8% over the previous year. Notably, the salary which is AU$445.7k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below AU$295m, reported a median total CEO compensation of AU$585k. From this we gather that Michael Kotsanis is paid around the median for CEOs in the industry. Furthermore, Michael Kotsanis directly owns AU$101k worth of shares in the company.

On an industry level, roughly 67% of total compensation represents salary and 33% is other remuneration. Our data reveals that Acrux allocates salary more or less in line with the wider market. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Acrux Limited's Growth

Acrux Limited's earnings per share (EPS) grew 15% per year over the last three years. Its revenue is up 29% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Acrux Limited Been A Good Investment?

Few Acrux Limited shareholders would feel satisfied with the return of -65% 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. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. If there are some unknown variables that are influencing the stock's price, surely shareholders would have some concerns. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 5 warning signs for Acrux you should be aware of, and 2 of them are potentially serious.

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.