Here's Why We Think Cosmo Lady (China) Holdings Company Limited's (HKG:2298) CEO Compensation Looks Fair

Key Insights

• Cosmo Lady (China) Holdings will host its Annual General Meeting on 28th of June
• Salary of CN¥457.0k is part of CEO Yaonan Zheng's total remuneration
• Total compensation is 71% below industry average
• Cosmo Lady (China) Holdings' EPS grew by 44% over the past three years while total shareholder loss over the past three years was 80%

Shareholders may be wondering what CEO Yaonan Zheng plans to do to improve the less than great performance at Cosmo Lady (China) Holdings Company Limited (HKG:2298) recently. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 28th of June. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

See our latest analysis for Cosmo Lady (China) Holdings

How Does Total Compensation For Yaonan Zheng Compare With Other Companies In The Industry?

According to our data, Cosmo Lady (China) Holdings Company Limited has a market capitalization of HK$461m, and paid its CEO total annual compensation worth CN¥539k over the year to December 2023. We note that's an increase of 58% above last year. In particular, the salary of CN¥457.0k, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Hong Kong Luxury industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was CN¥1.8m. In other words, Cosmo Lady (China) Holdings pays its CEO lower than the industry median. Moreover, Yaonan Zheng also holds HK$6.2m worth of Cosmo Lady (China) Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	CN¥457k	CN¥269k	85%
Other	CN¥82k	CN¥73k	15%
Total Compensation	CN¥539k	CN¥342k	100%

Speaking on an industry level, nearly 94% of total compensation represents salary, while the remainder of 6% is other remuneration. There isn't a significant difference between Cosmo Lady (China) Holdings and the broader market, in terms of salary allocation in the overall compensation package. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Cosmo Lady (China) Holdings Company Limited's Growth Numbers

Cosmo Lady (China) Holdings Company Limited's earnings per share (EPS) grew 44% per year over the last three years. Its revenue is down 8.4% over the previous year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Cosmo Lady (China) Holdings Company Limited Been A Good Investment?

With a total shareholder return of -80% over three years, Cosmo Lady (China) Holdings Company Limited shareholders would by and large be disappointed. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The fact that shareholders are sitting on a loss is certainly disheartening. This contrasts to the strong EPS growth recently however, and suggests that there may be other factors at play driving down the share price. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. The upcoming AGM will provide shareholders the opportunity to raise their concerns and evaluate if the board’s judgement and decision-making is aligned with their expectations.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Cosmo Lady (China) Holdings that investors should think about before committing capital to this stock.

Switching gears from Cosmo Lady (China) Holdings, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com