What has SEAS performance been like?
Profitability of a company is a strong indication of SEAS's ability to generate returns on shareholders' funds through corporate activities. In this exercise, I will use profits as a proxy for Manby's performance. Over the last year SEAS produced negative earnings of -$193.9M , which is a further decline from prior year's loss of -$11.7M. However, SEAS hasn’t always been loss-making, with an average EPS of $0.19 over the past five years. In the situation of negative earnings, the company may be incurring a period of reinvestment and growth, or it can be a signal of some headwind. In any event, CEO compensation should emulate the current state of the business. In the most recent report, Manby's total remuneration declined by more than half of the prior year's level, to $5,392,064. Moreover, Manby's pay is also made up of non-cash items, which means that variabilities in SEAS's share price can move the real level of what the CEO actually receives.What's a reasonable CEO compensation?
Though one size does not fit all, since compensation should be tailored to the specific company and market, we can fashion a high-level benchmark to see if SEAS deviates substantially from its peers. This outcome can help shareholders ask the right question about Manby’s incentive alignment. On average, a US small-cap has a value of $1B, produces earnings of $96M, and remunerates its CEO at roughly $2.7M per annum. Typically I would look at market cap and earnings as a proxy for performance, however, SEAS's negative earnings reduces the usefulness of my formula. Given the range of pay for small-cap executives, it seems like Manby's pay is above other similar companies.
What this means for you:
Are you a shareholder? The next CEO pay bump should be questioned by shareholders at AGM voting. Given that Manby's pay is already above the bracket of other CEOs of similar companies, what justifies a further increase? Although CEO pay is not the be all and end all, it serves as a signal as to whether the board's and management's incentives are aligned with the rest of the shareholders. To find out more about SEAS's governance, look through our infographic report of the company's board and management.
Are you a potential investor? In order to determine whether or not you should invest in SEAS, your thesis should be built on fundamentals. Even though CEO pay isn't technically a key concern, it could serve as an indication as to how board members align incentives and how they think about setting policies. These issues directly impacts how SEAS makes money, and factors impacting your return on investment. To research more about these fundamentals, I recommend you check out our simple infographic report on SEAS's financial metrics.
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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.