This Is Why Omega Diagnostics Group PLC's (LON:ODX) CEO Compensation Looks Appropriate

Despite strong share price growth of 258% for Omega Diagnostics Group PLC (LON:ODX) 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 15 September 2021. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for Omega Diagnostics Group

How Does Total Compensation For Colin King Compare With Other Companies In The Industry?

Our data indicates that Omega Diagnostics Group PLC has a market capitalization of UK£98m, and total annual CEO compensation was reported as UK£217k for the year to March 2021. That's a notable increase of 8.0% on last year. Notably, the salary which is UK£205.1k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below UK£145m, we found that the median total CEO compensation was UK£219k. From this we gather that Colin King is paid around the median for CEOs in the industry. Furthermore, Colin King directly owns UK£457k worth of shares in the company.

Component	2021	2020	Proportion (2021)
Salary	UK£205k	UK£192k	94%
Other	UK£12k	UK£9.4k	6%
Total Compensation	UK£217k	UK£201k	100%

Speaking on an industry level, nearly 77% of total compensation represents salary, while the remainder of 23% is other remuneration. Omega Diagnostics Group is paying a higher share of its remuneration through a salary in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Omega Diagnostics Group PLC's Growth

Over the last three years, Omega Diagnostics Group PLC has shrunk its earnings per share by 52% per year. Its revenue is down 11% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Omega Diagnostics Group PLC Been A Good Investment?

Boasting a total shareholder return of 258% over three years, Omega Diagnostics Group PLC has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 2 which are significant) in Omega Diagnostics Group we think you should know about.

Important note: Omega Diagnostics Group 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. 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. Simply Wall St has no position in any stocks mentioned.
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