Dana Stonestreet is the CEO of HomeTrust Bancshares Inc (NASDAQ:HTBI), which has recently grown to a market capitalization of US$549.28m. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. Incentives can be in the form of compensation, which should always be structured in a way that promotes value-creation to shareholders. I will break down Stonestreet’s pay and compare this to the company’s performance over the same period, as well as measure it against other US CEOs leading companies of similar size and profitability.
What has HTBI’s performance been like?HTBI can create value to shareholders by increasing its profitability, which in turn is reflected into the share price and the investor’s ability to sell their shares at higher capital gains. Recently, HTBI released a profit of US$8.24m , which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of US$11.72m. However, HTBI has strived to sustain a strong track record of generating profits, given its average EPS of US$0.49 over the past couple of years. During times of abating earnings, the company may be facing a period of reinvestment and growth, or it can be an indication of some headwind. Regardless, CEO compensation should echo the current condition of the business. From the latest financial report, Stonestreet’s total compensation grew by 43.72% to US$1.47m. In addition to this, Stonestreet’s pay is also made up of 41.62% non-cash elements, which means that fluctuations in HTBI’s share price can impact the actual level of what the CEO actually collects at the end of the year.
Is HTBI’s CEO overpaid relative to the market?Though there is no cookie-cutter approach, as compensation should be tailored to the specific company and market, we can estimate a high-level benchmark to see if HTBI deviates substantially from its peers. This outcome can help direct shareholders to ask the right question about Stonestreet’s incentive alignment. Generally, a US small-cap is worth around $1B, creates earnings of $96M, and remunerates its CEO circa $2.7M annually. Accounting for the size of HTBI in terms of market cap, as well as its performance, using earnings as a proxy, it seems that Stonestreet is compensated similar to the average US small-cap CEO This could mean Stonestreet is paid a suitable level.
You can breathe easy knowing that shareholder funds aren’t being used to overpay HTBI’s CEO. However, on the flipside, you should ask whether Stonestreet is appropriately remunerated on the basis of retention. Its important for shareholders to be active in voting governance decisions, as board members are only representatives of investors’ voices. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Governance: To find out more about HTBI’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 HTBI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.