We Think Some Shareholders May Hesitate To Increase 5N Plus Inc.'s (TSE:VNP) CEO Compensation

Despite positive share price growth of 28% for 5N Plus Inc. (TSE:VNP) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 13 May 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for 5N Plus

Comparing 5N Plus Inc.'s CEO Compensation With the industry

At the time of writing, our data shows that 5N Plus Inc. has a market capitalization of CA$339m, and reported total annual CEO compensation of US$1.1m for the year to December 2020. Notably, that's a decrease of 49% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at US$488k.

On examining similar-sized companies in the industry with market capitalizations between CA$122m and CA$488m, we discovered that the median CEO total compensation of that group was US$513k. Hence, we can conclude that AJ Roshan is remunerated higher than the industry median. What's more, AJ Roshan holds CA$1.0m worth of shares in the company in their own name.

Component	2020	2019	Proportion (2020)
Salary	US$488k	US$474k	44%
Other	US$628k	US$1.7m	56%
Total Compensation	US$1.1m	US$2.2m	100%

On an industry level, around 74% of total compensation represents salary and 26% is other remuneration. It's interesting to note that 5N Plus allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at 5N Plus Inc.'s Growth Numbers

Over the last three years, 5N Plus Inc. has shrunk its earnings per share by 43% per year. It saw its revenue drop 9.6% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has 5N Plus Inc. Been A Good Investment?

With a total shareholder return of 28% over three years, 5N Plus Inc. shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for 5N Plus that you should be aware of before investing.

Important note: 5N Plus 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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