Stock Analysis

Here's Why It's Unlikely That Jacobson Pharma Corporation Limited's (HKG:2633) CEO Will See A Pay Rise This Year

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Shareholders will probably not be too impressed with the underwhelming results at Jacobson Pharma Corporation Limited (HKG:2633) recently. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 23 September 2021. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Jacobson Pharma

Comparing Jacobson Pharma Corporation Limited's CEO Compensation With the industry

At the time of writing, our data shows that Jacobson Pharma Corporation Limited has a market capitalization of HK$1.2b, and reported total annual CEO compensation of HK$5.0m for the year to March 2021. This means that the compensation hasn't changed much from last year. We note that the salary portion, which stands at HK$3.54m constitutes the majority of total compensation received by the CEO.

On examining similar-sized companies in the industry with market capitalizations between HK$778m and HK$3.1b, we discovered that the median CEO total compensation of that group was HK$5.0m. So it looks like Jacobson Pharma compensates Derek Sum in line with the median for the industry. What's more, Derek Sum holds HK$730m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary HK$3.5m HK$3.5m 71%
Other HK$1.4m HK$1.4m 29%
Total CompensationHK$5.0m HK$5.0m100%

On an industry level, roughly 71% of total compensation represents salary and 29% is other remuneration. Jacobson Pharma is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. 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.

SEHK:2633 CEO Compensation September 16th 2021

A Look at Jacobson Pharma Corporation Limited's Growth Numbers

Over the last three years, Jacobson Pharma Corporation Limited has shrunk its earnings per share by 6.6% per year. Its revenue is down 8.0% over the previous 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 Jacobson Pharma Corporation Limited Been A Good Investment?

Few Jacobson Pharma Corporation Limited shareholders would feel satisfied with the return of -57% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for Jacobson Pharma that investors should be aware of in a dynamic business environment.

Important note: Jacobson Pharma 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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