What Can We Learn About Prophecy International Holdings' (ASX:PRO) CEO Compensation?

Brad Thomas became the CEO of Prophecy International Holdings Limited (ASX:PRO) in 2016, 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.

View our latest analysis for Prophecy International Holdings

How Does Total Compensation For Brad Thomas Compare With Other Companies In The Industry?

At the time of writing, our data shows that Prophecy International Holdings Limited has a market capitalization of AU$42m, and reported total annual CEO compensation of AU$316k for the year to June 2020. That's a modest increase of 3.7% on the prior year. In particular, the salary of AU$272.5k, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below AU$261m, reported a median total CEO compensation of AU$334k. From this we gather that Brad Thomas is paid around the median for CEOs in the industry.

On an industry level, around 60% of total compensation represents salary and 40% is other remuneration. It's interesting to note that Prophecy International Holdings pays out a greater portion of remuneration through salary, compared to the industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Prophecy International Holdings Limited's Growth Numbers

Over the last three years, Prophecy International Holdings Limited has shrunk its earnings per share by 86% per year. Its revenue is up 13% over the last year.

Overall this is not a very positive result for shareholders. And while it's good to see some good revenue growth recently, the growth isn't really fast enough for us to put aside my concerns around EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Prophecy International Holdings Limited Been A Good Investment?

Prophecy International Holdings Limited has generated a total shareholder return of 12% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

As previously discussed, Brad is compensated close to the median for companies of its size, and which belong to the same industry. Prophecy International Holdings has had a poor showing when it comes to EPS growth, and it's tough to say that shareholder returns have done much to excite us. This doesn't compare well with CEO compensation, which is close to the industry median. We wouldn't go as far as saying CEO compensation is inappropriate, but we don't think the executive is underpaid.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 2 warning signs for Prophecy International Holdings (1 can't be ignored!) 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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