What Can We Make Of Nathan's Famous' (NASDAQ:NATH) CEO Compensation?

Eric Gatoff has been the CEO of Nathan's Famous, Inc. (NASDAQ:NATH) since 2007, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Nathan's Famous.

View our latest analysis for Nathan's Famous

How Does Total Compensation For Eric Gatoff Compare With Other Companies In The Industry?

Our data indicates that Nathan's Famous, Inc. has a market capitalization of US$257m, and total annual CEO compensation was reported as US$1.1m for the year to March 2020. We note that's a decrease of 18% compared to last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$500k.

For comparison, other companies in the same industry with market capitalizations ranging between US$100m and US$400m had a median total CEO compensation of US$1.7m. Accordingly, Nathan's Famous pays its CEO under the industry median. Furthermore, Eric Gatoff directly owns US$4.8m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, nearly 25% of total compensation represents salary, while the remainder of 75% is other remuneration. Nathan's Famous pays out 47% of remuneration in the form of a salary, significantly higher than the industry average. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

Nathan's Famous, Inc.'s Growth

Nathan's Famous, Inc. has seen its earnings per share (EPS) increase by 60% a year over the past three years. It saw its revenue drop 24% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. 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?

With a three year total loss of 4.7% for the shareholders, Nathan's Famous, Inc. would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As previously discussed, Eric is compensated less than what is normal for CEOs of companies of similar size, and which belong to the same industry. However, the EPS growth over three years is certainly impressive. It's tough to criticize CEO compensation when the per-share EPS movement is positive. Shareholders, though, would ideally like to see shareholder returns head north before they agree to any raise.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 4 warning signs for Nathan's Famous (2 shouldn't be ignored!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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