Our View On China Creative Digital Entertainment's (HKG:8078) CEO Pay

The CEO of China Creative Digital Entertainment Limited (HKG:8078) is Stephen Shiu, and this article examines 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.

View our latest analysis for China Creative Digital Entertainment

Comparing China Creative Digital Entertainment Limited's CEO Compensation With the industry

At the time of writing, our data shows that China Creative Digital Entertainment Limited has a market capitalization of HK$15m, and reported total annual CEO compensation of HK$2.3m for the year to June 2020. That's a notable decrease of 28% on last year. Notably, the salary which is HK$2.24m, represents most of the total compensation being paid.

In comparison with other companies in the industry with market capitalizations under HK$1.6b, the reported median total CEO compensation was HK$1.3m. Hence, we can conclude that Stephen Shiu is remunerated higher than the industry median. Moreover, Stephen Shiu also holds HK$1.2m worth of China Creative Digital Entertainment stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Talking in terms of the industry, salary represented approximately 91% of total compensation out of all the companies we analyzed, while other remuneration made up 9.3% of the pie. Investors will find it interesting that China Creative Digital Entertainment pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at China Creative Digital Entertainment Limited's Growth Numbers

Over the last three years, China Creative Digital Entertainment Limited has shrunk its earnings per share by 89% per year. It saw its revenue drop 79% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has China Creative Digital Entertainment Limited Been A Good Investment?

Given the total shareholder loss of 100% over three years, many shareholders in China Creative Digital Entertainment Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Stephen receives almost all of their compensation through a salary. As we noted earlier, China Creative Digital Entertainment pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Disappointingly, share price gains over the last three years have failed to materialize. To make matters worse, EPS growth has also been negative during this period. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 3 warning signs (and 2 which shouldn't be ignored) in China Creative Digital Entertainment we think you should know about.

Important note: China Creative Digital Entertainment 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. 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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