Joe Hanna became the CEO of McGrath RentCorp (NASDAQ:MGRC) in 2017, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for McGrath RentCorp.
How Does Total Compensation For Joe Hanna Compare With Other Companies In The Industry?
At the time of writing, our data shows that McGrath RentCorp has a market capitalization of US$1.4b, and reported total annual CEO compensation of US$2.6m for the year to December 2019. That is, the compensation was roughly the same as last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$624k.
On examining similar-sized companies in the industry with market capitalizations between US$1.0b and US$3.2b, we discovered that the median CEO total compensation of that group was US$4.5m. Accordingly, McGrath RentCorp pays its CEO under the industry median. Moreover, Joe Hanna also holds US$3.8m worth of McGrath RentCorp stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. There isn't a significant difference between McGrath RentCorp and the broader market, in terms of salary allocation in the overall compensation package. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.
McGrath RentCorp's Growth
Over the past three years, McGrath RentCorp has seen its earnings per share (EPS) grow by 34% per year. In the last year, its revenue is up 12%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. 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 McGrath RentCorp Been A Good Investment?
McGrath RentCorp has served shareholders reasonably well, with a total return of 31% over three years. But they would probably prefer not to see CEO compensation far in excess of the median.
As we noted earlier, McGrath RentCorp pays its CEO lower than the norm for similar-sized companies belonging to the same industry. But over the last three years, EPS growth has been growing rapidly, which is a great sign for the company. Shareholder returns, in comparison, have not been as impressive. We would wish for better returns (whether dividends or capital gains) but we do admire the solidEPS growth on show here. As a result of these considerations, CEO compensation seems quite appropriate.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for McGrath RentCorp that you should be aware of before investing.
Switching gears from McGrath RentCorp, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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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. 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.
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