Stock Analysis

Here's Why Shareholders May Want To Be Cautious With Increasing Steel & Tube Holdings Limited's (NZSE:STU) CEO Pay Packet

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As many shareholders of Steel & Tube Holdings Limited (NZSE:STU) will be aware, they have not made a gain on their investment in the past three years. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. The AGM coming up on the 30 September 2021 could be an opportunity for shareholders to bring these concerns to the board's attention. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.

See our latest analysis for Steel & Tube Holdings

Comparing Steel & Tube Holdings Limited's CEO Compensation With the industry

Our data indicates that Steel & Tube Holdings Limited has a market capitalization of NZ$172m, and total annual CEO compensation was reported as NZ$994k for the year to June 2021. We note that's an increase of 41% above last year. In particular, the salary of NZ$721.1k, 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 NZ$285m, we found that the median total CEO compensation was NZ$316k. Accordingly, our analysis reveals that Steel & Tube Holdings Limited pays Mark Malpass north of the industry median. Moreover, Mark Malpass also holds NZ$331k worth of Steel & Tube Holdings stock directly under their own name.

Component20212020Proportion (2021)
Salary NZ$721k NZ$703k 73%
Other NZ$273k - 27%
Total CompensationNZ$994k NZ$703k100%

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Steel & Tube Holdings is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

NZSE:STU CEO Compensation September 23rd 2021

Steel & Tube Holdings Limited's Growth

Steel & Tube Holdings Limited has seen its earnings per share (EPS) increase by 35% a year over the past three years. Its revenue is up 15% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Steel & Tube Holdings Limited Been A Good Investment?

Given the total shareholder loss of 9.7% over three years, many shareholders in Steel & Tube Holdings Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for Steel & Tube Holdings 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. 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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