Is MotorCycle Holdings Limited (ASX:MTO) Excessively Paying Its CEO?

Dave Ahmet became the CEO of MotorCycle Holdings Limited (ASX:MTO) in 2011. First, this article will compare CEO compensation with compensation at similar sized companies. Then we’ll look at a snap shot of the business growth. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for MotorCycle Holdings

How Does Dave Ahmet’s Compensation Compare With Similar Sized Companies?

Our data indicates that MotorCycle Holdings Limited is worth AU$147m, and total annual CEO compensation was reported as AU$709k for the year to June 2019. That’s less than last year. We think total compensation is more important but we note that the CEO salary is lower, at AU$637k. We examined a group of similar sized companies, with market capitalizations of below AU$291m. The median CEO total compensation in that group is AU$378k.

It would therefore appear that MotorCycle Holdings Limited pays Dave Ahmet more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You might want to check this free visual report on analyst forecasts for future earnings.

You can see a visual representation of the CEO compensation at MotorCycle Holdings, below.

ASX:MTO CEO Compensation, November 8th 2019
ASX:MTO CEO Compensation, November 8th 2019

Is MotorCycle Holdings Limited Growing?

On average over the last three years, MotorCycle Holdings Limited has shrunk earnings per share by 13% each year (measured with a line of best fit). It achieved revenue growth of 9.3% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. The modest increase in revenue in the last year isn’t enough to make me overlook the disappointing change in earnings per share. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO.

Has MotorCycle Holdings Limited Been A Good Investment?

With a three year total loss of 29%, MotorCycle Holdings Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

We compared total CEO remuneration at MotorCycle Holdings Limited with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

We think many shareholders would be underwhelmed with the business growth over the last three years. Over the same period, investors would have come away with nothing in the way of share price gains. This analysis suggests to us that the CEO is paid too generously! So you may want to check if insiders are buying MotorCycle Holdings shares with their own money (free access).

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.