Does Parker-Hannifin Corporation’s (NYSE:PH) CEO Pay Reflect Performance?

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In 2015 Thomas Williams was appointed CEO of Parker-Hannifin Corporation (NYSE:PH). This report will, first, examine the CEO compensation levels in comparison to CEO compensation at other big companies. Next, we’ll consider growth that the business demonstrates. Third, we’ll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.

View our latest analysis for Parker-Hannifin

How Does Thomas Williams’s Compensation Compare With Similar Sized Companies?

According to our data, Parker-Hannifin Corporation has a market capitalization of US$22b, and pays its CEO total annual compensation worth US$18m. (This figure is for the year to 2018). While we always look at total compensation first, we note that the salary component is less, at US$1.2m. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO compensation was US$11m. There aren’t very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.

As you can see, Thomas Williams is paid more than the median CEO pay at large companies, in the same market. However, this does not necessarily mean Parker-Hannifin Corporation is paying too much. We can get a better idea of how generous the pay is by looking at the performance of the underlying business.

The graphic below shows how CEO compensation at Parker-Hannifin has changed from year to year.

NYSE:PH CEO Compensation February 13th 19
NYSE:PH CEO Compensation February 13th 19

Is Parker-Hannifin Corporation Growing?

Over the last three years Parker-Hannifin Corporation has grown its earnings per share (EPS) by an average of 17% per year (using a line of best fit). It achieved revenue growth of 8.7% over the last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. It’s good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.

Has Parker-Hannifin Corporation Been A Good Investment?

I think that the total shareholder return of 80%, over three years, would leave most Parker-Hannifin Corporation shareholders smiling. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

We examined the amount Parker-Hannifin Corporation pays its CEO, and compared it to the amount paid by other large companies. We found that it pays well over the median amount paid in the benchmark group.

However we must not forget that the EPS growth has been very strong over three years. On top of that, in the same period, returns to shareholders have been great. So, considering this good performance, the CEO compensation may be quite appropriate. Shareholders may want to check for free if Parker-Hannifin insiders are buying or selling shares.

Important note: Parker-Hannifin may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

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 editorial-team@simplywallst.com.