Should Shareholders Worry About Farmmi, Inc.'s (NASDAQ:FAMI) CEO Compensation Package?

Performance at Farmmi, Inc. (NASDAQ:FAMI) has not been particularly rosy recently and shareholders will likely be holding CEO Yefang Zhang and the board accountable for this. At the upcoming AGM on 16 July 2021, shareholders may have the opportunity to influence management to turn the performance around by voting on resolutions such as executive remuneration and other matters. From our analysis below, we think CEO compensation looks appropriate for now.

View our latest analysis for Farmmi

Comparing Farmmi, Inc.'s CEO Compensation With the industry

Our data indicates that Farmmi, Inc. has a market capitalization of US$77m, and total annual CEO compensation was reported as US$164k for the year to September 2020. That's a slight decrease of 7.3% on the prior year. Notably, the salary which is US$156.8k, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below US$200m, reported a median total CEO compensation of US$336k. In other words, Farmmi pays its CEO lower than the industry median. Moreover, Yefang Zhang also holds US$3.9m worth of Farmmi stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2020	2019	Proportion (2020)
Salary	US$157k	US$165k	96%
Other	US$6.9k	US$12k	4%
Total Compensation	US$164k	US$177k	100%

On an industry level, roughly 33% of total compensation represents salary and 67% is other remuneration. Farmmi is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Farmmi, Inc.'s Growth

Over the last three years, Farmmi, Inc. has shrunk its earnings per share by 46% per year. Its revenue is down 2.2% over the previous year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Farmmi, Inc. Been A Good Investment?

Few Farmmi, Inc. shareholders would feel satisfied with the return of -91% over three years. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Yefang receives almost all of their compensation through a salary. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 4 warning signs (and 2 which are concerning) in Farmmi we think you should know about.

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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