How Should Investors React To Precision Wires India's (NSE:PRECWIRE) CEO Pay?

The CEO of Precision Wires India Ltd. (NSE:PRECWIRE) is Mahendra Mehta, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Precision Wires India pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Precision Wires India

Comparing Precision Wires India Ltd.'s CEO Compensation With the industry

At the time of writing, our data shows that Precision Wires India Ltd. has a market capitalization of ₹3.5b, and reported total annual CEO compensation of ₹8.2m for the year to March 2020. We note that's a decrease of 29% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at ₹3.1m.

In comparison with other companies in the industry with market capitalizations under ₹15b, the reported median total CEO compensation was ₹6.5m. So it looks like Precision Wires India compensates Mahendra Mehta in line with the median for the industry. Moreover, Mahendra Mehta also holds ₹138m worth of Precision Wires India 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 93% of total compensation out of all the companies we analyzed, while other remuneration made up 7.3% of the pie. Precision Wires India pays a modest slice of remuneration through salary, as compared to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Precision Wires India Ltd.'s Growth

Over the last three years, Precision Wires India Ltd. has shrunk its earnings per share by 4.7% per year. In the last year, its revenue is down 24%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Precision Wires India Ltd. Been A Good Investment?

Given the total shareholder loss of 43% over three years, many shareholders in Precision Wires India Ltd. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As we noted earlier, Precision Wires India pays its CEO in line with similar-sized companies belonging to the same industry. On the other hand, EPS growth and total shareholder return have been negative for 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.

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 Precision Wires India that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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