A Quick Analysis On Elmo Software's (ASX:ELO) CEO Compensation

The CEO of Elmo Software Limited (ASX:ELO) is Danny Lessem, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Elmo Software

How Does Total Compensation For Danny Lessem Compare With Other Companies In The Industry?

Our data indicates that Elmo Software Limited has a market capitalization of AU$557m, and total annual CEO compensation was reported as AU$1.2m for the year to June 2020. We note that's an increase of 10% above last year. Notably, the salary which is AU$690.0k, represents most of the total compensation being paid.

For comparison, other companies in the same industry with market capitalizations ranging between AU$272m and AU$1.1b had a median total CEO compensation of AU$1.1m. This suggests that Elmo Software remunerates its CEO largely in line with the industry average. What's more, Danny Lessem holds AU$70m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

On an industry level, around 59% of total compensation represents salary and 41% is other remuneration. There isn't a significant difference between Elmo Software and the broader market, in terms of salary allocation in the overall compensation package. 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 Elmo Software Limited's Growth Numbers

Over the last three years, Elmo Software Limited has shrunk its earnings per share by 65% per year. Its revenue is up 25% over the last year.

The reduction in EPS, over three years, is arguably concerning. But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Elmo Software Limited Been A Good Investment?

We think that the total shareholder return of 74%, over three years, would leave most Elmo Software Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

As previously discussed, Danny is compensated close to the median for companies of its size, and which belong to the same industry. Investors will be happy that Elmo Software has produced strong shareholder returns for the past three years. At the same time, revenues are also moving northwards at a healthy pace. On a sour note, EPS growth has been negative. Overall, the company's performance hasn't been that disappointing for us to object the CEO compensation.

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 Elmo Software (1 is potentially serious!) that you should be aware of before investing here.

Switching gears from Elmo Software, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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