Is Graham Corporation’s (NYSE:GHM) CEO Pay Justified?

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In 2008 Jim Lines was appointed CEO of Graham Corporation (NYSE:GHM). First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Graham

How Does Jim Lines’s Compensation Compare With Similar Sized Companies?

Our data indicates that Graham Corporation is worth US$201m, and total annual CEO compensation is US$1.1m. (This number is for the twelve months until March 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$435k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of US$100m to US$400m. The median total CEO compensation was US$1.1m.

That means Jim Lines receives fairly typical remuneration for the CEO of a company that size. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance.

You can see a visual representation of the CEO compensation at Graham, below.

NYSE:GHM CEO Compensation, May 29th 2019
NYSE:GHM CEO Compensation, May 29th 2019

Is Graham Corporation Growing?

Graham Corporation has reduced its earnings per share by an average of 72% a year, over the last three years (measured with a line of best fit). It achieved revenue growth of 12% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. And while it’s good to see some good revenue growth recently, the growth isn’t really fast enough for me to put aside my concerns around earnings. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Shareholders might be interested in this free visualization of analyst forecasts.

Has Graham Corporation Been A Good Investment?

Graham Corporation has generated a total shareholder return of 19% over three years, so most shareholders would be reasonably content. But they probably wouldn’t be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary…

Remuneration for Jim Lines is close enough to the median pay for a CEO of a similar sized company .

We’re not seeing great strides in earnings per share, and total returns were decent but not amazing in the last three years. We do not think the CEO pay is a problem, but one might argue that the company should improve returns to shareholders before increasing it. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Graham.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.