Is Centum Electronics Limited's (NSE:CENTUM) CEO Salary Justified?

In 1994 Apparao Mallavarapu was appointed CEO of Centum Electronics Limited (NSE:CENTUM). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. Next, we'll consider growth that the business demonstrates. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Centum Electronics

How Does Apparao Mallavarapu's Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Centum Electronics Limited has a market cap of ₹4.6b, and reported total annual CEO compensation of ₹17m for the year to March 2019. We think total compensation is more important but we note that the CEO salary is lower, at ₹9.1m. We looked at a group of companies with market capitalizations under ₹14b, and the median CEO total compensation was ₹3.6m.

It would therefore appear that Centum Electronics Limited pays Apparao Mallavarapu 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. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

The graphic below shows how CEO compensation at Centum Electronics has changed from year to year.

Is Centum Electronics Limited Growing?

On average over the last three years, Centum Electronics Limited has grown earnings per share (EPS) by 29% each year (using a line of best fit). In the last year, its revenue is up 10%.

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. We don't have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Centum Electronics Limited Been A Good Investment?

Since shareholders would have lost about 39% over three years, some Centum Electronics Limited shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn't be too generous with CEO compensation.

In Summary...

We compared the total CEO remuneration paid by Centum Electronics Limited, and compared it to remuneration at a group of similar sized companies. We found that it pays well over the median amount paid in the benchmark group.

However we must not forget that the EPS growth has been very strong over three years. On the other hand returns to investors over the same period have probably disappointed many. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Shareholders may want to check for free if Centum Electronics insiders are buying or selling shares.

If you want to buy a stock that is better than Centum Electronics, this free list of high return, low debt companies is a great place to look.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.