How Should Investors React To Earthstone Energy, Inc.’s (NYSE:ESTE) CEO Pay?

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Frank Lodzinski became the CEO of Earthstone Energy, Inc. (NYSE:ESTE) in 2014. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally – as a second measure of performance – we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Earthstone Energy

How Does Frank Lodzinski’s Compensation Compare With Similar Sized Companies?

Our data indicates that Earthstone Energy, Inc. is worth US$366m, and total annual CEO compensation is US$1.6m. (This is based on the year to 2017). While we always look at total compensation first, we note that the salary component is less, at US$275k. We looked at a group of companies with market capitalizations from US$200m to US$800m, and the median CEO compensation was US$1.5m.

So Frank Lodzinski receives a similar amount to the median CEO pay, amongst the companies we looked at. Although this fact alone doesn’t tell us a great deal, it becomes more relevant when considered against the business performance.

You can see, below, how CEO compensation at Earthstone Energy has changed over time.

NYSE:ESTE CEO Compensation February 12th 19
NYSE:ESTE CEO Compensation February 12th 19

Is Earthstone Energy, Inc. Growing?

Earthstone Energy, Inc. has increased its earnings per share (EPS) by an average of 80% a year, over the last three years (using a line of best fit). In the last year, its revenue is up 82%.

This shows that the company has improved itself over the last few years. Good news for shareholders. The combination of strong revenue growth with medium-term earnings per share improvement certainly points to the kind of growth I like to see. Shareholders might be interested in this free visualization of analyst forecasts.

Has Earthstone Energy, Inc. Been A Good Investment?

Since shareholders would have lost about 50% over three years, some Earthstone Energy, Inc. shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

Frank Lodzinski is paid around what is normal the leaders of comparable size companies.

We think that the EPS growth is very pleasing, but it’s disappointing to see negative shareholder returns over three years. Considering the the positives we don’t think the CEO pays is too high, but it’s certainly hard to argue it is too low. Whatever your view on compensation, you might want to check if insiders are buying or selling Earthstone Energy shares (free trial).

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.