Fulai Lang became the CEO of Hanwei Energy Services Corp. (TSE:HE) in 2006, 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 assess whether Hanwei Energy Services pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
View our latest analysis for Hanwei Energy Services
How Does Total Compensation For Fulai Lang Compare With Other Companies In The Industry?
At the time of writing, our data shows that Hanwei Energy Services Corp. has a market capitalization of CA$2.9m, and reported total annual CEO compensation of CA$120k for the year to March 2020. We note that's a decrease of 13% compared to last year. Notably, the salary of CA$120k is the entirety of the CEO compensation.
On comparing similar-sized companies in the industry with market capitalizations below CA$255m, we found that the median total CEO compensation was CA$759k. Accordingly, Hanwei Energy Services pays its CEO under the industry median. Furthermore, Fulai Lang directly owns CA$521k worth of shares in the company, implying that they are deeply invested in the company's success.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | CA$120k | CA$125k | 100% |
| Other | - | CA$13k | - |
| Total Compensation | CA$120k | CA$138k | 100% |
On an industry level, around 32% of total compensation represents salary and 68% is other remuneration. At the company level, Hanwei Energy Services pays Fulai Lang solely through a salary, preferring to go down a conventional route. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
A Look at Hanwei Energy Services Corp.'s Growth Numbers
Over the last three years, Hanwei Energy Services Corp. has shrunk its earnings per share by 26% per year. Its revenue is down 29% over the previous year.
The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Hanwei Energy Services Corp. Been A Good Investment?
Since shareholders would have lost about 25% over three years, some Hanwei Energy Services Corp. investors would surely be feeling negative emotions. So shareholders would probably want the company to be lessto generous with CEO compensation.
In Summary...
Hanwei Energy Services rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we touched on above, Hanwei Energy Services Corp. is currently paying its CEO below the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Over the last three years, shareholder returns have been downright disappointing, and EPSgrowth has been equally disappointing. Although we wouldn’t say CEO compensation is high, it’s tough to foresee shareholders warming up to thoughts of a bump anytime soon.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 2 which are potentially serious) in Hanwei Energy Services we think you should know about.
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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About TSXV:PEC.H
Peak Discovery Capital
Peak Discovery Capital Ltd., together with its subsidiaries, focusing on identifying and evaluating assets or businesses for future merger and acquisition.
Moderate with weak fundamentals.
