Stock Analysis

How Should Investors React To AtriCure's (NASDAQ:ATRC) CEO Pay?

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NasdaqGM:ATRC
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This article will reflect on the compensation paid to Mike Carrel who has served as CEO of AtriCure, Inc. (NASDAQ:ATRC) since 2012. This analysis will also assess whether AtriCure pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

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How Does Total Compensation For Mike Carrel Compare With Other Companies In The Industry?

According to our data, AtriCure, Inc. has a market capitalization of US$2.6b, and paid its CEO total annual compensation worth US$5.8m over the year to December 2019. That's a notable increase of 53% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$740k.

On comparing similar companies from the same industry with market caps ranging from US$2.0b to US$6.4b, we found that the median CEO total compensation was US$5.4m. This suggests that AtriCure remunerates its CEO largely in line with the industry average. Furthermore, Mike Carrel directly owns US$29m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20192018Proportion (2019)
Salary US$740k US$714k 13%
Other US$5.1m US$3.1m 87%
Total CompensationUS$5.8m US$3.8m100%

Talking in terms of the industry, salary represented approximately 21% of total compensation out of all the companies we analyzed, while other remuneration made up 79% of the pie. It's interesting to note that AtriCure 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.

ceo-compensation
NasdaqGM:ATRC CEO Compensation December 27th 2020

A Look at AtriCure, Inc.'s Growth Numbers

Over the last three years, AtriCure, Inc. has shrunk its earnings per share by 14% per year. Its revenue is down 5.5% over the previous year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has AtriCure, Inc. Been A Good Investment?

We think that the total shareholder return of 216%, over three years, would leave most AtriCure, Inc. shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

As we touched on above, AtriCure, Inc. is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Some investors may take issue with this, especially considering shrinking EPS for the past three years. On the flip side, shareholder returns have been strong over the same time, which is certainly a positive sign. We're not saying CEO compensation is too generous, but shareholders might think performance needs to be improved before paying any more.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 3 warning signs for AtriCure that investors should look into moving forward.

Important note: AtriCure 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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