This Is The Reason Why We Think PharmAust Limited's (ASX:PAA) CEO Might Be Underpaid

Shareholders will be pleased by the impressive results for PharmAust Limited (ASX:PAA) recently and CEO Roger Aston has played a key role. At the upcoming AGM on 21 October 2021, they will get a chance to hear the board review the company results, discuss future strategy and cast their vote on any resolutions such as executive remuneration. Let's take a look at why we think the CEO has done a good job and we'll present the case for a bump in pay.

Check out our latest analysis for PharmAust

Comparing PharmAust Limited's CEO Compensation With the industry

Our data indicates that PharmAust Limited has a market capitalization of AU$30m, and total annual CEO compensation was reported as AU$285k for the year to June 2021. There was no change in the compensation compared to last year. Notably, the salary which is AU$260.0k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below AU$272m, reported a median total CEO compensation of AU$465k. In other words, PharmAust pays its CEO lower than the industry median. Moreover, Roger Aston also holds AU$1.4m worth of PharmAust stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	AU$260k	AU$260k	91%
Other	AU$25k	AU$25k	9%
Total Compensation	AU$285k	AU$285k	100%

On an industry level, around 59% of total compensation represents salary and 41% is other remuneration. PharmAust pays out 91% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

PharmAust Limited's Growth

PharmAust Limited's earnings per share (EPS) grew 40% per year over the last three years. In the last year, its revenue is down 11%.

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. 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 PharmAust Limited Been A Good Investment?

Most shareholders would probably be pleased with PharmAust Limited for providing a total return of 123% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Some shareholders will probably be more lenient on CEO compensation in the upcoming AGM given the pleasing performance of the company recently. However, despite the strong growth in earnings and share price growth, the focus for shareholders would be how the company plans to steer the company towards sustainable profitability in the near future.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 2 warning signs for PharmAust that investors should think about before committing capital to this stock.

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.

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.

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