Dan Arnold has been the CEO of LPL Financial Holdings Inc. (NASDAQ:LPLA) since 2017, 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 LPL Financial Holdings.
Comparing LPL Financial Holdings Inc.'s CEO Compensation With the industry
At the time of writing, our data shows that LPL Financial Holdings Inc. has a market capitalization of US$7.4b, and reported total annual CEO compensation of US$7.7m for the year to December 2019. That's a modest increase of 7.6% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$842k.
On examining similar-sized companies in the industry with market capitalizations between US$4.0b and US$12b, we discovered that the median CEO total compensation of that group was US$8.2m. This suggests that LPL Financial Holdings remunerates its CEO largely in line with the industry average. Moreover, Dan Arnold also holds US$16m worth of LPL Financial Holdings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Speaking on an industry level, nearly 15% of total compensation represents salary, while the remainder of 85% is other remuneration. In LPL Financial Holdings' case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at LPL Financial Holdings Inc.'s Growth Numbers
Over the past three years, LPL Financial Holdings Inc. has seen its earnings per share (EPS) grow by 37% per year. In the last year, its revenue is up 4.4%.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's also good to see modest revenue growth, suggesting the underlying business is healthy. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.
Has LPL Financial Holdings Inc. Been A Good Investment?
Boasting a total shareholder return of 88% over three years, LPL Financial Holdings Inc. has done well by shareholders. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.
As we noted earlier, LPL Financial Holdings pays its CEO in line with similar-sized companies belonging to the same industry. Investors would surely be happy to see that returns have been great, and that EPS is up. So one could argue that CEO compensation is quite modest, if you consider company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.
CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for LPL Financial Holdings that investors should look into moving forward.
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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