The CEO of PuraPharm Corporation Limited (HKG:1498) is Abraham Chan, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether PuraPharm pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing PuraPharm Corporation Limited's CEO Compensation With the industry
At the time of writing, our data shows that PuraPharm Corporation Limited has a market capitalization of HK$263m, and reported total annual CEO compensation of HK$2.9m for the year to December 2019. That's a notable increase of 55% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at HK$1.4m.
For comparison, other companies in the industry with market capitalizations below HK$1.6b, reported a median total CEO compensation of HK$4.0m. This suggests that PuraPharm remunerates its CEO largely in line with the industry average. What's more, Abraham Chan holds HK$88m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Talking in terms of the industry, salary represented approximately 59% of total compensation out of all the companies we analyzed, while other remuneration made up 41% of the pie. It's interesting to note that PuraPharm allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
A Look at PuraPharm Corporation Limited's Growth Numbers
PuraPharm Corporation Limited has reduced its earnings per share by 120% a year over the last three years. It saw its revenue drop 7.2% over the last year.
Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 PuraPharm Corporation Limited Been A Good Investment?
Since shareholders would have lost about 77% over three years, some PuraPharm Corporation Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As previously discussed, Abraham is compensated close to the median for companies of its size, and which belong to the same industry. In the meantime, the company has reported declining EPS growth and shareholder returns over the last three years. It's tough to call out the compensation as inappropriate, but shareholders might not favor a raise before company performance improves.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 2 warning signs for PuraPharm (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
Important note: PuraPharm 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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