What Can We Conclude About CareTech Holdings' (LON:CTH) CEO Pay?

Haroon Sheikh became the CEO of CareTech Holdings PLC (LON:CTH) in 1993, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for CareTech Holdings.

See our latest analysis for CareTech Holdings

Comparing CareTech Holdings PLC's CEO Compensation With the industry

At the time of writing, our data shows that CareTech Holdings PLC has a market capitalization of UK£587m, and reported total annual CEO compensation of UK£971k for the year to September 2020. That's a modest increase of 5.5% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at UK£450k.

In comparison with other companies in the industry with market capitalizations ranging from UK£287m to UK£1.1b, the reported median CEO total compensation was UK£715k. Accordingly, our analysis reveals that CareTech Holdings PLC pays Haroon Sheikh north of the industry median. Moreover, Haroon Sheikh also holds UK£3.6m worth of CareTech Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 74% of total compensation out of all the companies we analyzed, while other remuneration made up 26% of the pie. CareTech Holdings pays a modest slice of remuneration through salary, as compared 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.

CareTech Holdings PLC's Growth

Over the last three years, CareTech Holdings PLC has shrunk its earnings per share by 3.5% per year. In the last year, its revenue is up 8.8%.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has CareTech Holdings PLC Been A Good Investment?

We think that the total shareholder return of 42%, over three years, would leave most CareTech Holdings PLC shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

As previously discussed, Haroon is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. We're not seeing great strides in EPS, but the company has clearly pleased some investors, given the returns over the last three years. Considering positive investor returns, it would be bold of us to criticize CEO compensation, but shareholders might want to see healthier EPS growth before a raise is given out.

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 2 warning signs for CareTech Holdings that you should be aware of before investing.

Important note: CareTech Holdings 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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