What has SUD’s performance been like?SUD can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Recently, SUD produced negative earnings of -AU$2.52M , which is a further decline from prior year’s loss of -AU$1.42M. Furthermore, on average, SUD has been loss-making in the past, with a 5-year average EPS of -AU$0.0037. In the situation of unprofitability the company may be incurring a period of reinvestment and growth, or it can be an indication of some headwind. Regardless, CEO compensation should be reflective of the current condition of the business. In the most recent financial report, Carter’s total remuneration remained stable at AU$279.23K since the previous year.
Is SUD’s CEO overpaid relative to the market?
While there is no cookie-cutter approach, as remuneration should be tailored to the specific company and market, we can gauge a high-level base line to see if SUD deviates substantially from its peers. This outcome helps investors ask the right question about Carter’s incentive alignment. Normally, an Australian small-cap is worth around $140M, generates earnings of $10M, and remunerates its CEO circa $500,000 annually. Usually I would look at market cap and earnings as a proxy for performance, however, SUD’s negative earnings lower the effectiveness of this method. Analyzing the range of remuneration for small-cap executives, it seems like Carter is being paid within the bounds of reasonableness. Putting everything together, although SUD is loss-making, it seems like the CEO’s pay is appropriate.
In order to determine whether or not you should invest in SUD, your thesis should be built on fundamentals. Even though CEO pay isn’t technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how SUD makes money, and factors impacting your return on investment. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about SUD’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SUD? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!