How Does Premier Explosives' (NSE:PREMEXPLN) CEO Pay Compare With Company Performance?

The CEO of Premier Explosives Limited (NSE:PREMEXPLN) is Amarnath Gupta, 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.

Check out our latest analysis for Premier Explosives

How Does Total Compensation For Amarnath Gupta Compare With Other Companies In The Industry?

At the time of writing, our data shows that Premier Explosives Limited has a market capitalization of ₹1.6b, and reported total annual CEO compensation of ₹29m for the year to March 2020. This means that the compensation hasn't changed much from last year. In particular, the salary of ₹24.8m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below ₹15b, we found that the median total CEO compensation was ₹6.5m. Accordingly, our analysis reveals that Premier Explosives Limited pays Amarnath Gupta north of the industry median. What's more, Amarnath Gupta holds ₹466m 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 89% of total compensation out of all the companies we analyzed, while other remuneration made up 11% of the pie. Although there is a difference in how total compensation is set, Premier Explosives more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Premier Explosives Limited's Growth

Over the last three years, Premier Explosives Limited has shrunk its earnings per share by 109% per year. Its revenue is down 19% over the previous year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Premier Explosives Limited Been A Good Investment?

With a three year total loss of 64% for the shareholders, Premier Explosives Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As previously discussed, Amarnath is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Disappointingly, share price gains over the last three years have failed to materialize. Arguably worse, we've been waiting for positive EPS growth for the last three years. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for Premier Explosives (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Important note: Premier Explosives 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.

If you’re looking to trade Premier Explosives, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.