Guido Arnout is the CEO of 4DS Memory Limited (ASX:4DS), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
View our latest analysis for 4DS Memory
Comparing 4DS Memory Limited's CEO Compensation With the industry
According to our data, 4DS Memory Limited has a market capitalization of AU$165m, and paid its CEO total annual compensation worth AU$524k over the year to June 2020. That's a notable decrease of 25% on last year. In particular, the salary of AU$364.9k, makes up a huge portion of the total compensation being paid to the CEO.
On comparing similar-sized companies in the industry with market capitalizations below AU$260m, we found that the median total CEO compensation was AU$350k. Accordingly, our analysis reveals that 4DS Memory Limited pays Guido Arnout north of the industry median. What's more, Guido Arnout holds AU$379k worth of shares in the company in their own name.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | AU$365k | AU$395k | 70% |
| Other | AU$160k | AU$303k | 30% |
| Total Compensation | AU$524k | AU$698k | 100% |
Talking in terms of the industry, salary represented approximately 37% of total compensation out of all the companies we analyzed, while other remuneration made up 63% of the pie. 4DS Memory pays out 70% of remuneration in the form of a salary, significantly higher than the industry average. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
A Look at 4DS Memory Limited's Growth Numbers
Over the last three years, 4DS Memory Limited has shrunk its earnings per share by 10% per year. It achieved revenue growth of 87% over the last year.
Investors would be a bit wary of companies that have lower EPS On the other hand, the strong revenue growth suggests the business is growing. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has 4DS Memory Limited Been A Good Investment?
Boasting a total shareholder return of 131% over three years, 4DS Memory Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
In Summary...
As we noted earlier, 4DS Memory pays its CEO higher than the norm for similar-sized companies belonging to the same industry. But shareholder returns and revenue growth have been very healthy as we saw before. Importantly though, EPS has not been growing over the same stretch. Although we would have liked to see EPS growth, positive shareholder returns, and growing revenues make us believe CEO compensation is reasonable.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for 4DS Memory (1 is significant!) that you should be aware of before investing here.
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. 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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About ASX:4DS
4DS Memory
A semiconductor technology company, provides non-volatile memory technology services in Australia.
Flawless balance sheet low.
