This Is Why Avalon Holdings Corporation's (NYSEMKT:AWX) CEO Compensation Looks Appropriate

By
Simply Wall St
Published
April 22, 2021
NYSEAM:AWX

Performance at Avalon Holdings Corporation (NYSEMKT:AWX) has been rather uninspiring recently and shareholders may be wondering how CEO Ron Klingle plans to fix this. They will get a chance to exercise their voting power to influence the future direction of the company in the next AGM on 29 April 2021. Setting appropriate executive remuneration to align with the interests of shareholders may also be a way to influence the company performance in the long run. We think CEO compensation looks appropriate given the data we have put together.

View our latest analysis for Avalon Holdings

Comparing Avalon Holdings Corporation's CEO Compensation With the industry

Our data indicates that Avalon Holdings Corporation has a market capitalization of US$13m, and total annual CEO compensation was reported as US$248k for the year to December 2020. That is, the compensation was roughly the same as last year. Notably, the salary which is US$210.0k, represents most of the total compensation being paid.

On comparing similar-sized companies in the industry with market capitalizations below US$200m, we found that the median total CEO compensation was US$481k. Accordingly, Avalon Holdings pays its CEO under the industry median. Moreover, Ron Klingle also holds US$2.6m worth of Avalon Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary US$210k US$210k 85%
Other US$38k US$33k 15%
Total CompensationUS$248k US$243k100%

Talking in terms of the industry, salary represented approximately 23% of total compensation out of all the companies we analyzed, while other remuneration made up 77% of the pie. Avalon Holdings pays out 85% of remuneration in the form of a salary, significantly higher than the industry average. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

ceo-compensation
AMEX:AWX CEO Compensation April 22nd 2021

A Look at Avalon Holdings Corporation's Growth Numbers

Avalon Holdings Corporation has reduced its earnings per share by 35% a year over the last three years. In the last year, its revenue is down 14%.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Avalon Holdings Corporation Been A Good Investment?

Most shareholders would probably be pleased with Avalon Holdings Corporation for providing a total return of 66% over three years. 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...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. Shareholders might want to question the board about these concerns, and revisit their investment thesis for the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 4 warning signs for Avalon Holdings you should be aware of, and 1 of them is concerning.

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.

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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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