Is Frontier Developments plc’s (LON:FDEV) CEO Being Overpaid?

David Braben is the CEO of Frontier Developments plc (LON:FDEV). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Frontier Developments

How Does David Braben’s Compensation Compare With Similar Sized Companies?

Our data indicates that Frontier Developments plc is worth UK£403m, and total annual CEO compensation was reported as UK£407k for the year to May 2018. We think total compensation is more important but we note that the CEO salary is lower, at UK£200k. When we examined a selection of companies with market caps ranging from UK£161m to UK£643m, we found the median CEO total compensation was UK£703k.

A first glance this seems like a real positive for shareholders, since David Braben is paid less than the average total compensation paid by similar sized companies. However, before we heap on the praise, we should delve deeper to understand business performance.

The graphic below shows how CEO compensation at Frontier Developments has changed from year to year.

AIM:FDEV CEO Compensation, September 16th 2019
AIM:FDEV CEO Compensation, September 16th 2019

Is Frontier Developments plc Growing?

Frontier Developments plc has increased its earnings per share (EPS) by an average of 52% a year, over the last three years (using a line of best fit). It achieved revenue growth of 162% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see.

Has Frontier Developments plc Been A Good Investment?

Boasting a total shareholder return of 447% over three years, Frontier Developments 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.

In Summary…

It appears that Frontier Developments plc remunerates its CEO below most similar sized companies.

Since the business is growing, many would argue this suggests the pay is modest. The strong history of shareholder returns might even have some thinking that David Braben deserves a raise! Most shareholders like to see a modestly paid CEO combined with strong performance by the company. It would be even more positive if company insiders are buying shares. So you may want to check if insiders are buying Frontier Developments shares with their own money (free access).

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.