Is Cal-Maine Foods, Inc.’s (NASDAQ:CALM) CEO Paid Enough Relative To Peers?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Dolph Baker has been the CEO of Cal-Maine Foods, Inc. (NASDAQ:CALM) since 2010. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. 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. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for Cal-Maine Foods

How Does Dolph Baker’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Cal-Maine Foods, Inc. has a market cap of US$1.9b, and is paying total annual CEO compensation of US$1.3m. (This is based on the year to June 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at US$413k. We looked at a group of companies with market capitalizations from US$1.0b to US$3.2b, and the median CEO total compensation was US$3.9m.

A first glance this seems like a real positive for shareholders, since Dolph Baker is paid less than the average total compensation paid by similar sized companies. Though positive, it’s important we delve into the performance of the actual business.

The graphic below shows how CEO compensation at Cal-Maine Foods has changed from year to year.

NasdaqGS:CALM CEO Compensation, July 17th 2019
NasdaqGS:CALM CEO Compensation, July 17th 2019

Is Cal-Maine Foods, Inc. Growing?

On average over the last three years, Cal-Maine Foods, Inc. has shrunk earnings per share by 22% each year (measured with a line of best fit). It achieved revenue growth of 14% over the last year.

Few shareholders would be pleased to read that earnings per share are lower over three years. While the revenue growth is good to see, it is outweighed by the fact that earnings per share are down, over three years. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration.

Has Cal-Maine Foods, Inc. Been A Good Investment?

Since shareholders would have lost about 2.3% over three years, some Cal-Maine Foods, Inc. shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

It looks like Cal-Maine Foods, Inc. pays its CEO less than similar sized companies.

The compensation paid to Dolph Baker is lower than is usual at similar sized companies, but the eps growth is lacking, just like the returns (over three years). Considering all these factors, we’d stop short of saying the CEO pay is too high, but we don’t think shareholders would want to see a pay rise before business performance improves. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Cal-Maine Foods.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.