It's Unlikely That NexJ Systems Inc.'s (TSE:NXJ) CEO Will See A Huge Pay Rise This Year

By
Simply Wall St
Published
June 03, 2021
TSX:NXJ
Source: Shutterstock

The underwhelming share price performance of NexJ Systems Inc. (TSE:NXJ) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 10 June 2021. They could also influence management through voting on resolutions such as executive remuneration. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

Check out our latest analysis for NexJ Systems

How Does Total Compensation For J. O'Donnell Compare With Other Companies In The Industry?

According to our data, NexJ Systems Inc. has a market capitalization of CA$13m, and paid its CEO total annual compensation worth CA$514k over the year to December 2020. We note that's an increase of 31% above last year. We note that the salary of CA$300.0k makes up a sizeable portion of the total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below CA$242m, reported a median total CEO compensation of CA$205k. Hence, we can conclude that J. O'Donnell is remunerated higher than the industry median.

Component20202019Proportion (2020)
Salary CA$300k CA$300k 58%
Other CA$214k CA$91k 42%
Total CompensationCA$514k CA$391k100%

On an industry level, around 71% of total compensation represents salary and 29% is other remuneration. It's interesting to note that NexJ Systems allocates a smaller portion of compensation to salary in comparison to the broader industry. 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:NXJ CEO Compensation June 4th 2021

A Look at NexJ Systems Inc.'s Growth Numbers

NexJ Systems Inc.'s earnings per share (EPS) grew 17% per year over the last three years. The trailing twelve months of revenue was pretty much the same as the prior period.

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. 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 NexJ Systems Inc. Been A Good Investment?

The return of -75% over three years would not have pleased NexJ Systems Inc. shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Despite the growth in its earnings, the share price decline in the past three years is certainly concerning. A huge lag in share price growth when earnings have grown may indicate there could be other issues that are affecting the company at the moment that the market is focused on. Shareholders would be keen to know what's holding the stock back when earnings have grown. The upcoming AGM will be a chance for shareholders to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 2 warning signs for NexJ Systems (1 doesn't sit too well with us!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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