Is STM Group Plc (LON:STM) Excessively Paying Its CEO?

By
Simply Wall St
Published
June 02, 2020
AIM:STM

In 2016, Alan Kentish was appointed CEO of STM Group Plc (LON:STM). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for STM Group

How Does Alan Kentish's Compensation Compare With Similar Sized Companies?

Our data indicates that STM Group Plc is worth UK£19m, and total annual CEO compensation was reported as UK£205k for the year to December 2019. We looked at a group of companies with market capitalizations under UK£160m, and the median CEO total compensation was UK£273k.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where STM Group stands. On an industry level, roughly 69% of total compensation represents salary and 31% is other remuneration. Speaking on a company level, STM Group does not pay a salary to Alan Kentish, preferring to remunerate the executive through non-salary compensation.

So Alan Kentish receives a similar amount to the median CEO pay, amongst the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance. You can see, below, how CEO compensation at STM Group has changed over time.

AIM:STM CEO Compensation June 2nd 2020
AIM:STM CEO Compensation June 2nd 2020

Is STM Group Plc Growing?

Over the last three years STM Group Plc has seen earnings per share (EPS) move in a positive direction by an average of 14% per year (using a line of best fit). It achieved revenue growth of 8.6% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Shareholders might be interested in this free visualization of analyst forecasts.

Has STM Group Plc Been A Good Investment?

Since shareholders would have lost about 17% over three years, some STM Group Plc shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Remuneration for Alan Kentish is close enough to the median pay for a CEO of a similar sized company .

We like that the company is growing EPS, but we cannot say the same about the lacklustre shareholder returns (over the last three years). We'd be surprised if shareholders want to see a pay rise for the CEO, but we'd stop short of calling their pay too generous. CEO compensation is an important area to keep your eyes on, but we've also identified 5 warning signs for STM Group (1 is a bit concerning!) that you should be aware of before investing here.

Important note: STM Group 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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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. Thank you for reading.

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