Tom Erixon became the CEO of Alfa Laval AB (publ) (STO:ALFA) in 2016, and we think it's a good time to look at 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.
How Does Total Compensation For Tom Erixon Compare With Other Companies In The Industry?
At the time of writing, our data shows that Alfa Laval AB (publ) has a market capitalization of kr95b, and reported total annual CEO compensation of kr27m for the year to December 2019. Notably, that's an increase of 16% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at kr11m.
For comparison, other companies in the industry with market capitalizations above kr66b, reported a median total CEO compensation of kr39m. In other words, Alfa Laval pays its CEO lower than the industry median. What's more, Tom Erixon holds kr26m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 56% of total compensation represents salary, while the remainder of 44% is other remuneration. In Alfa Laval's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Alfa Laval AB (publ)'s Growth
Over the past three years, Alfa Laval AB (publ) has seen its earnings per share (EPS) grow by 20% per year. In the last year, its revenue is down 2.3%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..
Has Alfa Laval AB (publ) Been A Good Investment?
Alfa Laval AB (publ) has generated a total shareholder return of 22% over three years, so most shareholders would be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.
As previously discussed, Tom is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. Meanwhile, EPS growth has been rock solid for the past three years. Shareholder returns, in comparison, have not been as impressive. Shareholder returns could be better but we're pleased with the positive EPS growth. As a result of these considerations, CEO compensation seems quite appropriate.
CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Alfa Laval that investors should think about before committing capital to this stock.
Important note: Alfa Laval 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.
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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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