Should You Worry About YuanShengTai Dairy Farm Limited's (HKG:1431) CEO Pay Cheque?

The CEO of YuanShengTai Dairy Farm Limited (HKG:1431) is Wenguo Fu. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. After that, we will consider the growth in the business. 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.

View our latest analysis for YuanShengTai Dairy Farm

How Does Wenguo Fu's Compensation Compare With Similar Sized Companies?

Our data indicates that YuanShengTai Dairy Farm Limited is worth HK$1.5b, and total annual CEO compensation was reported as CN¥2.3m for the year to December 2018. We think total compensation is more important but we note that the CEO salary is lower, at CN¥558k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. When we examined a selection of companies with market caps ranging from CN¥703m to CN¥2.8b, we found the median CEO total compensation was CN¥2.0m.

So Wenguo Fu receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance. Although we don't have analyst forecasts you might want to assess this data-rich visualization of earnings, revenue and cash flow.

The graphic below shows how CEO compensation at YuanShengTai Dairy Farm has changed from year to year.

Is YuanShengTai Dairy Farm Limited Growing?

Over the last three years YuanShengTai Dairy Farm Limited has shrunk its earnings per share by an average of 83% per year (measured with a line of best fit). In the last year, its revenue is up 15%.

Sadly for shareholders, earnings per share are actually down, over three years. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that earnings per share has gone backwards over three years. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO.

Has YuanShengTai Dairy Farm Limited Been A Good Investment?

With a three year total loss of 56%, YuanShengTai Dairy Farm Limited would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

Wenguo Fu is paid around what is normal the leaders of comparable size companies.

After looking at EPS and total shareholder returns, it's certainly hard to argue the company has performed well, since both metrics are down. Few would argue that it's wise for the company to pay any more, before returns improve. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling YuanShengTai Dairy Farm (free visualization of insider trades).

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

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.

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