Peter Cook has been the CEO of Novatti Group Limited (ASX:NOV) since 2002, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Novatti Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Novatti Group Limited's CEO Compensation With the industry
According to our data, Novatti Group Limited has a market capitalization of AU$59m, and paid its CEO total annual compensation worth AU$698k over the year to June 2020. That's a notable increase of 22% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at AU$286k.
In comparison with other companies in the industry with market capitalizations under AU$260m, the reported median total CEO compensation was AU$321k. This suggests that Peter Cook is paid more than the median for the industry.
Speaking on an industry level, nearly 59% of total compensation represents salary, while the remainder of 41% is other remuneration. Novatti Group sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Novatti Group Limited's Growth
Over the last three years, Novatti Group Limited has shrunk its earnings per share by 26% per year. In the last year, its revenue is up 33%.
The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. 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. 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 Novatti Group Limited Been A Good Investment?
Since shareholders would have lost about 35% over three years, some Novatti Group Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As previously discussed, Peter is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. At the same time, looking at EPS and total shareholder returns, it's tough to say Novatti Group is in a sound position, considering both metrics are down. On a more positive note, the company has produced a more positive revenue growth more recently. Suffice it to say, we don't think the CEO is underpaid!
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 4 warning signs for Novatti Group (of which 2 make us uncomfortable!) that you should know about in order to have a holistic understanding of the stock.
Important note: Novatti Group is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
When trading Novatti Group or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.