Shareholders Will Probably Not Have Any Issues With Nathan's Famous, Inc.'s (NASDAQ:NATH) CEO Compensation

Performance at Nathan's Famous, Inc. (NASDAQ:NATH) has been rather uninspiring recently and shareholders may be wondering how CEO Eric Gatoff 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 02 September 2021. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We think CEO compensation looks appropriate given the data we have put together.

View our latest analysis for Nathan's Famous

Comparing Nathan's Famous, Inc.'s CEO Compensation With the industry

According to our data, Nathan's Famous, Inc. has a market capitalization of US$275m, and paid its CEO total annual compensation worth US$1.3m over the year to March 2021. That's a notable increase of 19% on last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at US$396k.

On examining similar-sized companies in the industry with market capitalizations between US$100m and US$400m, we discovered that the median CEO total compensation of that group was US$2.2m. This suggests that Eric Gatoff is paid below the industry median. What's more, Eric Gatoff holds US$5.1m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	US$396k	US$500k	31%
Other	US$876k	US$573k	69%
Total Compensation	US$1.3m	US$1.1m	100%

Speaking on an industry level, nearly 20% of total compensation represents salary, while the remainder of 80% is other remuneration. It's interesting to note that Nathan's Famous pays out a greater portion of remuneration through salary, compared to the industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Nathan's Famous, Inc.'s Growth Numbers

Nathan's Famous, Inc. has seen its earnings per share (EPS) increase by 43% a year over the past three years. Its revenue is down 1.3% over the previous year.

Shareholders would be glad to know that the company has improved itself over the last few years. While it would be good to see revenue growth, profits matter more in the end. 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 Nathan's Famous, Inc. Been A Good Investment?

Given the total shareholder loss of 21% over three years, many shareholders in Nathan's Famous, Inc. are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The fact that shareholders are sitting on a loss is certainly disheartening. The share price trend has diverged with the robust growth in EPS however, suggesting there may be other factors that could be driving the price performance. There needs to be more focus by management and the board to examine why the share price has diverged from fundamentals. In the upcoming AGM, shareholders will get the opportunity to discuss these concerns with the board and assess if the board's plan is likely to improve company performance.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Nathan's Famous (2 are concerning!) that you should be aware of before investing here.

Switching gears from Nathan's Famous, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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