Jonathan Murphy became the CEO of Assura Plc (LON:AGR) in 2016, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
Note: The company does not report funds from operations, and as a result, we have used earnings per share in our analysis.
Comparing Assura Plc's CEO Compensation With the industry
At the time of writing, our data shows that Assura Plc has a market capitalization of UK£2.1b, and reported total annual CEO compensation of UK£1.1m for the year to March 2020. Notably, that's an increase of 42% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at UK£395k.
On comparing similar companies from the same industry with market caps ranging from UK£1.5b to UK£4.9b, we found that the median CEO total compensation was UK£1.5m. From this we gather that Jonathan Murphy is paid around the median for CEOs in the industry. Moreover, Jonathan Murphy also holds UK£1.9m worth of Assura stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 38% of total compensation represents salary, while the remainder of 62% is other remuneration. There isn't a significant difference between Assura and the broader market, in terms of salary allocation in the overall compensation package. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
Assura Plc's Growth
Over the last three years, Assura Plc has shrunk its earnings per share by 17% per year. It achieved revenue growth of 8.9% over the last year.
The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has Assura Plc Been A Good Investment?
We think that the total shareholder return of 45%, over three years, would leave most Assura Plc shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
As we touched on above, Assura Plc is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This isn't great when you look at it against the backdrop of EPS growth, which has been negative for the past three years. On the other hand, shareholder returns are showing positive trends over the same time frame. We wouldn't say CEO compensation is too high, but shrinking EPS is undoubtedly an issue that will have to be addressed.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 3 warning signs for Assura you should be aware of, and 1 of them makes us a bit uncomfortable.
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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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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