Is Elecon Engineering Company Limited's (NSE:ELECON) CEO Overpaid Relative To Its Peers?

Prayasvin Patel is the CEO of Elecon Engineering Company Limited (NSE:ELECON). First, this article will compare CEO compensation with compensation at similar sized companies. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Elecon Engineering

How Does Prayasvin Patel's Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Elecon Engineering Company Limited has a market cap of ₹7.4b, and is paying total annual CEO compensation of ₹21m. (This number is for the twelve months until March 2018). Notably, the salary of ₹20m is the vast majority of the CEO compensation. We looked at a group of companies with market capitalizations under ₹14b, and the median CEO total compensation was ₹1.2m.

It would therefore appear that Elecon Engineering Company Limited pays Prayasvin Patel more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn't mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

The graphic below shows how CEO compensation at Elecon Engineering has changed from year to year.

Is Elecon Engineering Company Limited Growing?

Over the last three years Elecon Engineering Company Limited has grown its earnings per share (EPS) by an average of 42% per year (using a line of best fit). In the last year, its revenue is up 14%.

This shows that the company has improved itself over the last few years. Good news for shareholders. It's a real positive to see this sort of growth in a single year. That suggests a healthy and growing business. Although we don't have analyst forecasts, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Elecon Engineering Company Limited Been A Good Investment?

With a total shareholder return of 17% over three years, Elecon Engineering Company Limited shareholders would, in general, be reasonably content. But they probably don't want to see the CEO paid more than is normal for companies around the same size.

In Summary...

We compared total CEO remuneration at Elecon Engineering Company Limited with the amount paid at companies with a similar market capitalization. We found that it pays well over the median amount paid in the benchmark group.

Importantly, though, the company has impressed with its earnings per share growth, over three years. Looking at the same time period, we think that the shareholder returns are respectable. While it may be worth researching further, we don't see a problem with the CEO pay, given the good EPS growth. Whatever your view on compensation, you might want to check if insiders are buying or selling Elecon Engineering shares (free trial).

If you want to buy a stock that is better than Elecon Engineering, this freelist of high return, low debt companies is a great place to look.

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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. Thank you for reading.