Is dorsaVi Ltd’s (ASX:DVL) CEO Salary Justified?

Andrew Ronchi became the CEO of dorsaVi Ltd (ASX:DVL) in 2008. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for dorsaVi

How Does Andrew Ronchi’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that dorsaVi Ltd has a market cap of AU$8.2m, and is paying total annual CEO compensation of AU$483k. (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$343k. We took a group of companies with market capitalizations below AU$279m, and calculated the median CEO compensation to be AU$362k.

As you can see, Andrew Ronchi is paid more than the median CEO pay at companies of a similar size, in the same market. However, this does not necessarily mean dorsaVi Ltd is paying too much. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at dorsaVi has changed from year to year.

ASX:DVL CEO Compensation, March 1st 2019
ASX:DVL CEO Compensation, March 1st 2019

Is dorsaVi Ltd Growing?

dorsaVi Ltd has increased its earnings per share (EPS) by an average of 39% a year, over the last three years (using a line of best fit). The trailing twelve months of revenue was pretty much the same as the prior period.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. While it would be good to see revenue growth, profits matter more in the end. Although we don’t have analyst forecasts, you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has dorsaVi Ltd Been A Good Investment?

Since shareholders would have lost about 90% over three years, some dorsaVi Ltd shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

We compared total CEO remuneration at dorsaVi Ltd with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. While EPS is positive, we’d say shareholders would want better returns before the CEO is paid much more. Whatever your view on compensation, you might want to check if insiders are buying or selling dorsaVi 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.