Is Concho Resources Inc.’s (NYSE:CXO) CEO Pay Fair?

In 2006 Tim Leach was appointed CEO of Concho Resources Inc. (NYSE:CXO). This analysis aims first to contrast CEO compensation with other large companies. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. The aim of all this is to consider the appropriateness of CEO pay levels.

Check out our latest analysis for Concho Resources

How Does Tim Leach’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that Concho Resources Inc. has a market cap of US$15b, and reported total annual CEO compensation of US$13m for the year to December 2018. While we always look at total compensation first, we note that the salary component is less, at US$1.1m. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).

So Tim Leach receives a similar amount to the median CEO pay, amongst the companies we looked at. This doesn’t tell us a whole lot on its own, but looking at the performance of the actual business will give us useful context.

You can see a visual representation of the CEO compensation at Concho Resources, below.

NYSE:CXO CEO Compensation, February 6th 2020
NYSE:CXO CEO Compensation, February 6th 2020

Is Concho Resources Inc. Growing?

Over the last three years Concho Resources Inc. has grown its earnings per share (EPS) by an average of 71% per year (using a line of best fit). Its revenue is up 15% over last year.

This shows that the company has improved itself over the last few years. Good news for shareholders. This sort of respectable year-on-year revenue growth is often seen at a healthy, growing business. You might want to check this free visual report on analyst forecasts for future earnings.

Has Concho Resources Inc. Been A Good Investment?

Given the total loss of 39% over three years, many shareholders in Concho Resources Inc. are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary…

Remuneration for Tim Leach is close enough to the median pay for a CEO of a large company .

We’d say the company can boast of its EPS growth, but we find the returns over the last three years to be lacking. We’d be surprised if shareholders want to see a pay rise for the CEO, but we’d stop short of calling their pay too generous. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Concho Resources.

Important note: Concho Resources may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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