What has been the trend in VUL's earnings?
Profitability of a company is a strong indication of VUL's ability to generate returns on shareholders' funds through corporate activities. In this exercise, I will use profits as a proxy for Laracy's performance. Recently, VUL produced negative earnings of -CA$1.73m , which is a further decline from prior year's loss of -CA$762.60k. Additionally, on average, VUL has been loss-making in the past, with a 5-year average EPS of -CA$0.025. In the situation of unprofitability the company may be going through a period of reinvestment and growth, or it can be a signal of some headwind. In any event, CEO compensation should echo the current condition of the business. In the most recent financial report, Laracy's total compensation rose by 15.82% to CA$217.26k. Furthermore, Laracy's pay is also made up of 9.17% non-cash elements, which means that fluxes in VUL's share price can affect the actual level of what the CEO actually takes home at the end of the day.Is VUL overpaying the CEO?
Even though one size does not fit all, as compensation should account for specific factors of the company and market, we can evaluate a high-level base line to see if VUL is an outlier. This outcome helps investors ask the right question about Laracy’s incentive alignment. Generally, a Canadian small-cap has a value of $345M, generates earnings of $24M, and remunerates its CEO circa $770,000 per annum. Typically I would look at market cap and earnings as a proxy for performance, however, VUL's negative earnings reduces the effectiveness of this method. Given the range of pay for small-cap executives, it seems like Laracy is remunerated sensibly relative to peers. On the whole, although VUL is unprofitable, it seems like the CEO’s pay is reflective of the appropriate level.
Next Steps:
In the upcoming year's AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Laracy's pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about VUL's governance, look through our infographic report of the company's board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VUL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.