Here's Why We Think Jerash Holdings (US), Inc.'s (NASDAQ:JRSH) CEO Compensation Looks Fair

Simply Wall St
September 08, 2021
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Performance at Jerash Holdings (US), Inc. (NASDAQ:JRSH) has been rather uninspiring recently and shareholders may be wondering how CEO Sam Choi 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 15 September 2021. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We have prepared some analysis below to show that CEO compensation looks to be reasonable.

Check out our latest analysis for Jerash Holdings (US)

Comparing Jerash Holdings (US), Inc.'s CEO Compensation With the industry

Our data indicates that Jerash Holdings (US), Inc. has a market capitalization of US$87m, and total annual CEO compensation was reported as US$280k for the year to March 2021. That's a slight decrease of 6.7% on the prior year. It is worth noting that the CEO compensation consists entirely of the salary, worth US$280k.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$596k. Accordingly, Jerash Holdings (US) pays its CEO under the industry median. What's more, Sam Choi holds US$33m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary US$280k US$300k 100%
Other - - -
Total CompensationUS$280k US$300k100%

Speaking on an industry level, nearly 23% of total compensation represents salary, while the remainder of 77% is other remuneration. At the company level, Jerash Holdings (US) pays Sam Choi solely through a salary, preferring to go down a conventional route. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

NasdaqCM:JRSH CEO Compensation September 9th 2021

Jerash Holdings (US), Inc.'s Growth

Jerash Holdings (US), Inc. has reduced its earnings per share by 8.3% a year over the last three years. In the last year, its revenue is up 14%.

The decline in EPS is a bit concerning. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Jerash Holdings (US), Inc. Been A Good Investment?

Most shareholders would probably be pleased with Jerash Holdings (US), Inc. for providing a total return of 44% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Jerash Holdings (US) pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean these strong returns may not continue. These concerns could be addressed to the board and shareholders should revisit their investment thesis to see if it still makes sense.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for Jerash Holdings (US) (of which 1 makes us a bit uncomfortable!) that you should know about in order to have a holistic understanding of the stock.

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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