Is Inventronics Limited's (CVE:IVX) CEO Pay Justified?

In 2012, Dan Stearne was appointed CEO of Inventronics Limited (CVE:IVX). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

Check out our latest analysis for Inventronics

How Does Dan Stearne's Compensation Compare With Similar Sized Companies?

According to our data, Inventronics Limited has a market capitalization of CA$507k, and paid its CEO total annual compensation worth CA$130k over the year to December 2019. That's a notable increase of 167% on last year. While we always look at total compensation first, we note that the salary component is less, at CA$121k. We examined a group of similar sized companies, with market capitalizations of below CA$273m. The median CEO total compensation in that group is CA$219k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Inventronics stands. Speaking on an industry level, we can see that nearly 21% of total compensation represents salary, while the remainder of 79% is other remuneration. Inventronics is paying a higher share of its remuneration through a salary in comparison to the overall industry.

Most shareholders would consider it a positive that Dan Stearne takes less total compensation than the CEOs of most similar size companies, leaving more for shareholders. Though positive, it's important we delve into the performance of the actual business. The graphic below shows how CEO compensation at Inventronics has changed from year to year.

Is Inventronics Limited Growing?

On average over the last three years, Inventronics Limited has seen earnings per share (EPS) move in a favourable direction by 81% each year (using a line of best fit). In the last year, its revenue is up 11%.

This shows that the company has improved itself over the last few years. Good news for shareholders. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. Although we don't have analyst forecasts you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Inventronics Limited Been A Good Investment?

Given the total loss of 12% over three years, many shareholders in Inventronics Limited are probably rather dissatisfied, to say the least. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

It appears that Inventronics Limited remunerates its CEO below most similar sized companies.

Considering the underlying business is growing earnings, this would suggest the pay is modest. Few would deny that the total shareholder return over the last three years could have been a lot better. We're not critical of the remuneration Dan Stearne receives, but it would be good to see improved returns to shareholders before the remuneration grows too much. In this case we may want to look deeper into the company. There are some real positives and we could see improved returns in the longer term. Taking a breather from CEO compensation, we've spotted 4 warning signs for Inventronics (of which 3 are concerning!) you should know about in order to have a holistic understanding of the stock.

Important note: Inventronics may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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