This article will reflect on the compensation paid to Peter Cook who has served as CEO of Novatti Group Limited (ASX:NOV) since 2002. This analysis will also assess whether Novatti Group pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
See our latest analysis for Novatti Group
Comparing Novatti Group Limited's CEO Compensation With the industry
At the time of writing, our data shows that Novatti Group Limited has a market capitalization of AU$50m, and reported total annual CEO compensation of AU$698k for the year to June 2020. Notably, that's an increase of 22% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at AU$286k.
On comparing similar-sized companies in the industry with market capitalizations below AU$274m, we found that the median total CEO compensation was AU$349k. Hence, we can conclude that Peter Cook is remunerated higher than the industry median.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | AU$286k | AU$335k | 41% |
| Other | AU$412k | AU$235k | 59% |
| Total Compensation | AU$698k | AU$570k | 100% |
On an industry level, around 62% of total compensation represents salary and 38% is other remuneration. It's interesting to note that Novatti Group allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
Novatti Group Limited's Growth
Novatti Group Limited has reduced its earnings per share by 26% a year over the last three years. It achieved revenue growth of 33% 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. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Novatti Group Limited Been A Good Investment?
With a total shareholder return of 19% over three years, Novatti Group Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.
To Conclude...
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, revenue figures for the company are growing at a nice pace over the last year. Shareholder returns have also grown during this time, but haven't been as impressive. EPS growth, on the other hand, is negative, a concerning trend. All things considered, we don't think CEO compensation is unfair, though shareholders will likely want to see an overall improvement in performance before any potential raise.
CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 5 warning signs for Novatti Group (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.
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.
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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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