Why We Think Construction Partners, Inc.'s (NASDAQ:ROAD) CEO Compensation Is Not Excessive At All

Key Insights

• Construction Partners will host its Annual General Meeting on 20th of March
• CEO Jule Smith's total compensation includes salary of US$605.8k
• The overall pay is comparable to the industry average
• Construction Partners' total shareholder return over the past three years was 60% while its EPS grew by 9.1% over the past three years

CEO Jule Smith has done a decent job of delivering relatively good performance at Construction Partners, Inc. (NASDAQ:ROAD) recently. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 20th of March. We present our case of why we think CEO compensation looks fair.

See our latest analysis for Construction Partners

How Does Total Compensation For Jule Smith Compare With Other Companies In The Industry?

According to our data, Construction Partners, Inc. has a market capitalization of US$2.7b, and paid its CEO total annual compensation worth US$2.4m over the year to September 2023. That's a modest increase of 3.5% on the prior year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$606k.

For comparison, other companies in the American Construction industry with market capitalizations ranging between US$2.0b and US$6.4b had a median total CEO compensation of US$3.1m. This suggests that Construction Partners remunerates its CEO largely in line with the industry average. Moreover, Jule Smith also holds US$33m worth of Construction Partners stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	US$606k	US$571k	25%
Other	US$1.8m	US$1.8m	75%
Total Compensation	US$2.4m	US$2.4m	100%

On an industry level, around 22% of total compensation represents salary and 78% is other remuneration. Construction Partners pays out 25% of remuneration in the form of a salary, significantly higher than the industry average. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Construction Partners, Inc.'s Growth

Over the past three years, Construction Partners, Inc. has seen its earnings per share (EPS) grow by 9.1% per year. In the last year, its revenue is up 19%.

We would argue that the modest growth in revenue is a notable positive. And the improvement in EPSis modest but respectable. Although we'll stop short of calling the stock a top performer, we think the company has potential. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Construction Partners, Inc. Been A Good Investment?

Boasting a total shareholder return of 60% over three years, Construction Partners, Inc. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. In saying that, any proposed increase to CEO compensation will still be assessed on how reasonable it is based on performance and industry benchmarks.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 2 warning signs for Construction Partners that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

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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.