Stock Analysis

Strategic Education, Inc.'s (NASDAQ:STRA) CEO Will Probably Find It Hard To See A Huge Raise This Year

  •  Updated

In the past three years, the share price of Strategic Education, Inc. (NASDAQ:STRA) has struggled to grow and now shareholders are sitting on a loss. Despite positive EPS growth in the past few years, the share price hasn't tracked the fundamental performance of the company. These are some of the concerns that shareholders may want to bring up at the next AGM held on 27 April 2021. They could also influence management through voting on resolutions such as executive remuneration. We discuss below why we think shareholders should be cautious of approving a raise for the CEO at the moment.

See our latest analysis for Strategic Education

How Does Total Compensation For Karl McDonnell Compare With Other Companies In The Industry?

According to our data, Strategic Education, Inc. has a market capitalization of US$2.1b, and paid its CEO total annual compensation worth US$4.6m over the year to December 2020. Notably, that's a decrease of 38% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at US$880k.

In comparison with other companies in the industry with market capitalizations ranging from US$1.0b to US$3.2b, the reported median CEO total compensation was US$5.0m. So it looks like Strategic Education compensates Karl McDonnell in line with the median for the industry. What's more, Karl McDonnell holds US$13m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20202019Proportion (2020)
Salary US$880k US$840k 19%
Other US$3.7m US$6.6m 81%
Total CompensationUS$4.6m US$7.4m100%

Talking in terms of the industry, salary represented approximately 19% of total compensation out of all the companies we analyzed, while other remuneration made up 81% of the pie. There isn't a significant difference between Strategic Education and the broader market, in terms of salary allocation in the overall compensation package. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

NasdaqGS:STRA CEO Compensation April 21st 2021

A Look at Strategic Education, Inc.'s Growth Numbers

Strategic Education, Inc.'s earnings per share (EPS) grew 25% per year over the last three years. Its revenue is up 3.0% over the last year.

Shareholders would be glad to know that the company has improved itself over the last few years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Strategic Education, Inc. Been A Good Investment?

With a three year total loss of 15% for the shareholders, Strategic Education, Inc. would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The stock's movement is disjointed with the company's earnings growth, which ideally should move in the same direction. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

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 Strategic Education that investors should think about before committing capital to this stock.

Important note: Strategic Education is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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