Did Parker create value?DLHC 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. Most recently, DLHC produced a profit of US$113.00K , which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of US$3.82M. However, DLHC has strived to maintain a good track record of profitability, given its average EPS of US$0.11 over the past couple of years. During times of falling profits, the company may be facing a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should echo the current condition of the business. From the latest report, Parker’s total compensation fell by -19.27%, to US$506.99K. Furthermore, Parker’s pay is also made up of 26.09% non-cash elements, which means that fluxes in DLHC’s share price can impact the real level of what the CEO actually receives.
What’s a reasonable CEO compensation?
Despite the fact that one size does not fit all, as compensation should be tailored to the specific company and market, we can gauge a high-level yardstick to see if DLHC deviates substantially from its peers. This outcome helps investors ask the right question about Parker’s incentive alignment. Typically, a US small-cap is worth around $1B, generates earnings of $96M, and remunerates its CEO circa $2.7M annually. Allowing for the size of DLHC in terms of market cap, as well as its performance, using earnings as a proxy, it seems that Parker is paid in-line with other US CEOs of small-caps, on average. This may mean that DLHC is appropriately compensating its CEO.
Hopefully this article has given you insight on how shareholders should think about DLHC’s governance policies such as CEO pay. As an investor, you have the right to understand how the board thinks about management incentives, and also the right to vote for and against substantial CEO pay changes. Governance is a big factor in investing, and I encourage you to dig deeper into those that represent your voice on the board. 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 DLHC’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 DLHC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!