What Can We Learn About Ambertech's (ASX:AMO) CEO Compensation?

Peter Amos became the CEO of Ambertech Limited (ASX:AMO) in 1995, 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 Ambertech

Comparing Ambertech Limited's CEO Compensation With the industry

According to our data, Ambertech Limited has a market capitalization of AU$15m, and paid its CEO total annual compensation worth AU$412k over the year to June 2020. That's a modest increase of 5.3% on the prior year. We note that the salary portion, which stands at AU$379.0k constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below AU$260m, we found that the median total CEO compensation was AU$399k. This suggests that Ambertech remunerates its CEO largely in line with the industry average. Furthermore, Peter Amos directly owns AU$930k worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 61% of total compensation represents salary and 39% is other remuneration. Ambertech pays out 92% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Ambertech Limited's Growth

Over the last three years, Ambertech Limited has shrunk its earnings per share by 32% per year. It achieved revenue growth of 2.8% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Ambertech Limited Been A Good Investment?

Most shareholders would probably be pleased with Ambertech Limited for providing a total return of 60% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

As we touched on above, Ambertech 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. This doesn't look good when you see that EPS growth over the last three years has been negative. On the other hand, shareholder returns are showing positive trends over the same time frame. We wouldn't say CEO compensation is too high, but shrinking EPS is undoubtedly an issue that will have to be addressed.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 4 warning signs (and 1 which is a bit unpleasant) in Ambertech we think you should know about.

Important note: Ambertech 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 Ambertech 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. Promoted

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.