This article will reflect on the compensation paid to Andy Callahan who has served as CEO of Hostess Brands, Inc. (NASDAQ:TWNK) since 2018. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Hostess Brands.
View our latest analysis for Hostess Brands
How Does Total Compensation For Andy Callahan Compare With Other Companies In The Industry?
Our data indicates that Hostess Brands, Inc. has a market capitalization of US$1.9b, and total annual CEO compensation was reported as US$4.5m for the year to December 2019. We note that's an increase of 12% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$825k.
For comparison, other companies in the same industry with market capitalizations ranging between US$1.0b and US$3.2b had a median total CEO compensation of US$2.8m. Hence, we can conclude that Andy Callahan is remunerated higher than the industry median. What's more, Andy Callahan holds US$731k worth of shares in the company in their own name.
| Component | 2019 | 2018 | Proportion (2019) |
| Salary | US$825k | US$508k | 18% |
| Other | US$3.7m | US$3.6m | 82% |
| Total Compensation | US$4.5m | US$4.1m | 100% |
On an industry level, roughly 24% of total compensation represents salary and 76% is other remuneration. It's interesting to note that Hostess Brands allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at Hostess Brands, Inc.'s Growth Numbers
Over the last three years, Hostess Brands, Inc. has shrunk its earnings per share by 46% per year. In the last year, its revenue is up 7.9%.
Overall this is not a very positive result for shareholders. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Hostess Brands, Inc. Been A Good Investment?
Hostess Brands, Inc. has generated a total shareholder return of 1.3% over three years, so most shareholders wouldn't be too disappointed. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.
In Summary...
As we noted earlier, Hostess Brands pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, EPS has not grown in three years, failing to impress us. While shareholder returns are acceptable, they don't delight. So you can understand why we do not think CEO compensation is particularly modest!
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 2 warning signs for Hostess Brands you should be aware of, and 1 of them is potentially serious.
Important note: Hostess Brands is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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Access Free AnalysisThis 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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About NasdaqCM:TWNK
Hostess Brands
Hostess Brands, Inc. develops, manufactures, markets, sells, and distributes snack products in the United States and Canada.
Adequate balance sheet and slightly overvalued.
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