A Look At NEXTDC's (ASX:NXT) CEO Remuneration

Craig Scroggie became the CEO of NEXTDC Limited (ASX:NXT) in 2012, and we think it's a good time to look at 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 NEXTDC

Comparing NEXTDC Limited's CEO Compensation With the industry

At the time of writing, our data shows that NEXTDC Limited has a market capitalization of AU$5.1b, and reported total annual CEO compensation of AU$3.1m for the year to June 2020. We note that's an increase of 44% above last year. We think total compensation is more important but our data shows that the CEO salary is lower, at AU$1.3m.

For comparison, other companies in the same industry with market capitalizations ranging between AU$2.7b and AU$8.7b had a median total CEO compensation of AU$3.4m. From this we gather that Craig Scroggie is paid around the median for CEOs in the industry. Moreover, Craig Scroggie also holds AU$22m worth of NEXTDC stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 66% of total compensation out of all the companies we analyzed, while other remuneration made up 34% of the pie. It's interesting to note that NEXTDC 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.

NEXTDC Limited's Growth

Over the last three years, NEXTDC Limited has shrunk its earnings per share by 127% per year. In the last year, its revenue is up 18%.

The decrease in EPS could be a concern for some investors. 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. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has NEXTDC Limited Been A Good Investment?

Most shareholders would probably be pleased with NEXTDC Limited for providing a total return of 95% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

As we touched on above, NEXTDC Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Investors will be happy that NEXTDC has produced strong shareholder returns for the past three years. Revenues have also showed some positive momentum, recently. However, on a concerning note, EPS is not growing. However, considering overall positive performance, we think Craig, shareholders might not be too worried about the CEO's compensation.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 1 warning sign for NEXTDC that investors should be aware of in a dynamic business environment.

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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