Here's Why Shareholders May Want To Be Cautious With Increasing Velocity Financial, Inc.'s (NYSE:VEL) CEO Pay Packet

Key Insights

• Velocity Financial will host its Annual General Meeting on 17th of May
• Salary of US$630.0k is part of CEO Chris Farrar's total remuneration
• The total compensation is 143% higher than the average for the industry
• Velocity Financial's total shareholder return over the past three years was 67% while its EPS grew by 47% over the past three years

Under the guidance of CEO Chris Farrar, Velocity Financial, Inc. (NYSE:VEL) has performed reasonably well recently. This is something shareholders will keep in mind as they cast their votes on company resolutions such as executive remuneration in the upcoming AGM on 17th of May. However, some shareholders may still want to keep CEO compensation within reason.

View our latest analysis for Velocity Financial

How Does Total Compensation For Chris Farrar Compare With Other Companies In The Industry?

Our data indicates that Velocity Financial, Inc. has a market capitalization of US$599m, and total annual CEO compensation was reported as US$3.9m for the year to December 2023. We note that's an increase of 29% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$630k.

On examining similar-sized companies in the American Diversified Financial industry with market capitalizations between US$200m and US$800m, we discovered that the median CEO total compensation of that group was US$1.6m. Hence, we can conclude that Chris Farrar is remunerated higher than the industry median. Furthermore, Chris Farrar directly owns US$9.1m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	US$630k	US$630k	16%
Other	US$3.3m	US$2.4m	84%
Total Compensation	US$3.9m	US$3.0m	100%

Talking in terms of the industry, salary represented approximately 15% of total compensation out of all the companies we analyzed, while other remuneration made up 85% of the pie. There isn't a significant difference between Velocity Financial and the broader market, in terms of salary allocation in the overall compensation package. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Velocity Financial, Inc.'s Growth

Velocity Financial, Inc. has seen its earnings per share (EPS) increase by 47% a year over the past three years. Its revenue is up 28% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The combination of strong revenue growth with medium-term EPS improvement certainly points to the kind of growth we like to see. 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 Velocity Financial, Inc. Been A Good Investment?

Most shareholders would probably be pleased with Velocity Financial, Inc. for providing a total return of 67% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. However, if the board proposes to increase the compensation, some shareholders might have questions given that the CEO is already being paid higher than the industry.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 1 warning sign for Velocity Financial that investors should be aware of in a dynamic business environment.

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. 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.