The underwhelming share price performance of China Health Group Limited (HKG:673) in the past three years would have disappointed many shareholders. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 09 September 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. They could also influence management through voting on resolutions such as executive remuneration. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.
Comparing China Health Group Limited's CEO Compensation With the industry
At the time of writing, our data shows that China Health Group Limited has a market capitalization of HK$298m, and reported total annual CEO compensation of HK$1.9m for the year to March 2021. There was no change in the compensation compared to last year. In particular, the salary of HK$1.20m, makes up a huge portion of the total compensation being paid to the CEO.
In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$2.0m. This suggests that China Health Group remunerates its CEO largely in line with the industry average.
On an industry level, around 86% of total compensation represents salary and 14% is other remuneration. It's interesting to note that China Health Group allocates a smaller portion of compensation to salary in comparison to the broader industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.
A Look at China Health Group Limited's Growth Numbers
China Health Group Limited's earnings per share (EPS) grew 10% per year over the last three years. It achieved revenue growth of 95% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's great to see that revenue growth is strong, too. These metrics suggest the business is growing strongly. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has China Health Group Limited Been A Good Investment?
The return of -37% over three years would not have pleased China Health Group Limited shareholders. So shareholders would probably want the company to be less generous with CEO compensation.
The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 2 warning signs for China Health Group (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.
Important note: China Health 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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