Here's Why Velan Inc.'s (TSE:VLN) CEO Compensation Is The Least Of Shareholders Concerns

By
Simply Wall St
Published
July 07, 2021
TSX:VLN
Source: Shutterstock

Shareholders may be wondering what CEO Yves Leduc plans to do to improve the less than great performance at Velan Inc. (TSE:VLN) recently. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 13 July 2021. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. In our opinion, CEO compensation does not look excessive and we discuss why.

See our latest analysis for Velan

Comparing Velan Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that Velan Inc. has a market capitalization of CA$220m, and reported total annual CEO compensation of US$579k for the year to February 2021. That's a modest increase of 4.6% on the prior year. Notably, the salary which is US$417.7k, represents most of the total compensation being paid.

On examining similar-sized companies in the industry with market capitalizations between CA$125m and CA$499m, we discovered that the median CEO total compensation of that group was US$845k. In other words, Velan pays its CEO lower than the industry median. Furthermore, Yves Leduc directly owns CA$408k worth of shares in the company.

Component20212020Proportion (2021)
Salary US$418k US$436k 72%
Other US$161k US$117k 28%
Total CompensationUS$579k US$553k100%

On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. Our data reveals that Velan allocates salary more or less in line with the wider market. 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.

ceo-compensation
TSX:VLN CEO Compensation July 7th 2021

A Look at Velan Inc.'s Growth Numbers

Over the past three years, Velan Inc. has seen its earnings per share (EPS) grow by 27% per year. In the last year, its revenue is down 19%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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 Velan Inc. Been A Good Investment?

With a three year total loss of 24% for the shareholders, Velan Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

The loss to shareholders over the past three years is certainly concerning. The share price trend has diverged with the robust growth in EPS however, suggesting there may be other factors that could be driving the price performance. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. In the upcoming AGM, shareholders will get the opportunity to discuss these concerns with the board and assess if the board's plan is likely to improve company performance.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Velan that investors should think about before committing capital to this stock.

Important note: Velan 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.

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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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.