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Douglas Starrett became the CEO of The L.S. Starrett Company (NYSE:SCX) in 1970. First, this article will compare CEO compensation with compensation at similar sized companies. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Douglas Starrett’s Compensation Compare With Similar Sized Companies?
According to our data, The L.S. Starrett Company has a market capitalization of US$52m, and pays its CEO total annual compensation worth US$641k. (This figure is for the year to June 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$425k. We examined a group of similar sized companies, with market capitalizations of below US$200m. The median CEO total compensation in that group is US$451k.
It would therefore appear that The L.S. Starrett Company pays Douglas Starrett more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.
You can see, below, how CEO compensation at L.S. Starrett has changed over time.
Is The L.S. Starrett Company Growing?
Over the last three years The L.S. Starrett Company has grown its earnings per share (EPS) by an average of 68% per year (using a line of best fit). In the last year, its revenue is up 5.4%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s also good to see modest revenue growth, suggesting the underlying business is healthy. We don’t have analyst forecasts, but shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has The L.S. Starrett Company Been A Good Investment?
Since shareholders would have lost about 34% over three years, some The L.S. Starrett Company shareholders would surely be feeling negative emotions. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.
We examined the amount The L.S. Starrett Company pays its CEO, and compared it to the amount paid by similar sized companies. Our data suggests that it pays above the median CEO pay within that group.
However we must not forget that the EPS growth has been very strong over three years. On the other hand returns to investors over the same period have probably disappointed many. While EPS is positive, we’d say shareholders would want better returns before the CEO is paid much more. So you may want to check if insiders are buying L.S. Starrett shares with their own money (free access).
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.
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 email@example.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.