What has FIN’s performance been like?Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Most recently, FIN produced an earnings of NZ$160.90K , which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of NZ$1.95M. However, FIN has strived to maintain a good track record of profitability, given its average EPS of NZ$0.097 over the past couple of years. During times of fall in profits, the company may be incurring a period of reinvestment and growth, or it can be a sign of some headwind. In any case, CEO compensation should be reflective of the current condition of the business. In the most recent report, Holliday’s total compensation fell by -5.20%, to NZ$663.48K. Although I couldn’t find information on the composition of Holliday’s pay, if some portion were non-cash items such as stocks and options, then variabilities in FIN’s share price can impact the true level of what the CEO actually receives.
Is FIN overpaying the CEO?
While one size does not fit all, as remuneration should account for specific factors of the company and market, we can gauge a high-level base line to see if FIN deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Holliday’s incentive alignment. Normally, a NZ small-cap is worth around $190M, produces earnings of $18M, and pays its CEO circa $480,000 per annum. Based on the size of FIN in terms of market cap, as well as its performance, using earnings as a proxy, it seems that Holliday is remunerated higher than other NZ CEOs of profitable small-caps. Even though this is only a high-level calculation, investors should be aware of this expense.
What this means for you:
In order to determine whether or not you should invest in FIN, your thesis should be built on fundamentals. Even though CEO pay isn’t technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how FIN makes money, and factors impacting your return on investment. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:
- Governance: To find out more about FIN’s governance, look through our infographic report of the company’s board and management.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FIN? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!